The funds that small business owners borrow from merchant companies are used to either start a business or buy various equipment for running restaurants, maintenance, payroll, sustainability, marketing and advertising. There are many people who know everything about starting a business venture but are unable to initiate the process due to lack of financial support. For such business owners, there are various options for funding available.

Bank Loans
Many people are not fond of banks due to the ratio of rejections for business loans. Many have been rejected, but there are still countless people who have acquired business loans and have very expertly utilized it in their businesses. With banks it is necessary to prove that you will be able to payback every penny, otherwise it is a great risk asking these banks for loans and at the same time you are a risk for the bank as well.

Bad Credit
Banks do not cater small business owners with bad credit. Merchant companies on the other hand, have different criteria. Individuals with bad credit can receive bad credit business loans through private lending companies, but due to bad credit the interest rate upon repayment increases. Anyone who is starting a business or planning to expand can benefit from such situations. Before approving the loan, lenders examine and scrutinize every detail.

Steps towards acquiring a Business Loan

1) Three Year Business Plan
The first step in obtaining a business loan is to develop a thorough, three-year business plan which should include possible earning for every month. This plan should be a complete outline of the expected income and salary that will go into starting and sustaining a business.

2) Research
The next step is to research many local banks. Small Business owners can set up a meeting with a bank manager to talk about the business in person. The bank will check the applicant’s credit during the application process. The banks always judge a business owner through his business planning and instantly outline his personality. Based on which they decide whether that person is eligible for bank loan or not. Hence, business owners are recommended to have a few years of experience in their industry or at least know exactly what they are doing.

3) Develop a debt-to-income monthly ratio
Another step towards obtaining a small business loan is to develop a debt-to-income monthly ratio which is debt compared to income every month. This ratio helps applicants who need to prove to a bank that they can handle the expenses of a small business. Applicants are also required to provide recent or past income tax returns.

So complete your research before you plan to choose a bank or a merchant company for your small business loan, so that everything later moves in accordance with your plans.