Business loans provide a lifeline for companies of all sizes. They can help cope with seasonal fluctuations in revenue or unexpected expenses. You can also make use of them to finance new equipment, inventory or a new location. It is essential to utilize these funds wisely to grow your company without relying on financing through debt.

Determine the amount of capital you need for your company and what kind of loan would be best to meet that need prior to you apply. You will need to be aware of the time frame you will need to repay the loan as this can affect your interest rates and fees. Many lenders offer a one-time loan option or credit line with terms for repayment that vary from one day to several years.

Most lenders will ask you to provide a variety of documents, such as your business plan financial statements, as well as your credit history. They may also require collateral, including equipment, real estate, or money owed to your company (accounts receivable). Some lenders will waive these requirements for customers who are already established who have excellent credit and those who are looking for large capital.

The lenders will also assess whether your company is able to repay the loan, by analyzing metrics such as its fixed-charge coverage rate and the amount of cash it will generate each month. They will check whether it has any outstanding debts as well as assess its compliance with all legal requirements. They also will look at the industry you work in to determine if it’s volatile or stable.

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