Considering a Nevada Small Business Loan? Ask These 4 Questions First
In Q1 2022, for the third year in a row, Nevada maintained its standing as the most robust economy in the country, according to a State Policy Reports ranking. Looking at measures like employment, population and personal income, Nevada outperformed the rest of the country despite the uncertain conditions of recent years.
As Northern Nevada entrepreneurs are well aware, small businesses and startups are an important factor in that continued economic vitality. If you’re a small business owner in Northern Nevada, you may be wondering how best to capitalize on the state economy’s positive momentum while preparing for any unforeseen bumps in the road ahead. Your banker can help you assess your available choices.
When it comes to growing your business, financing can make all the difference. You may be ready to purchase new equipment, have unexpected expenses you need to meet or simply want to increase your cash flow. Whatever the case, it’s a good idea to have a clear understanding of your needs before you approach lenders.
Here are some questions to help you decide whether applying for a business loan is a good option for you right now.
How will I use the money? And how will I pay it back?
Many would-be borrowers don’t think to ask themselves these two simple, crucial questions. It’s a good idea not only to ask them but to formulate a clear and detailed answer before you apply for a loan. Will a small business loan drive growth in revenue? It may be helpful to estimate how much. Do you want to use financing to reach new customers? Setting a concrete growth goal can help you reach it. Banks appreciate that this careful planning can mitigate risk. Demonstrating that you have a plan to use your loan wisely and repay it on time can help lenders do just that.
What kinds of terms work best for my situation?
There’s a simple rule of thumb: Short-term money is for short-term purposes, and long-term money is for long-term purposes. Short-term money could include a bridge loan to cover operational expenses or to meet immediate obligations, with loans that come due within a few months to a year. Long-term money — that is, a financial instrument that will mature at one year or more — is suitable to purchase fixed assets or equipment, invest in R&D or finance an expansion. Understanding the appropriate use of credit can be a useful way to evaluate such variables as the length of the loan and repayment terms.
What type of loan is best for my business?
Are you facing unexpected costs? A revolving line of credit might suit your situation best. Looking to cover startup costs? Small Business Administration (SBA) lending programs like SBA 504 or 7(a) could be a good option. Want to purchase new equipment? Equipment term loans could be the right fit. Is it time to expand to a new location or add real estate to your asset portfolio? You may want to consider a commercial real estate loan. Having a general sense of loan types before approaching lenders might turn up options you didn’t know you had.
Am I ready to provide all the information lenders need?
To understand your goals, a lender will undertake a thorough evaluation of your business and its needs. To do that, the bank will want to see various kinds of documentation before considering you for a loan. Relevant information may include your business plan, any relevant licenses in your city or region, tax and payroll documents, personal and business bank statements and profit-and-loss statements.
Before you approach lenders, consider making a checklist, or ask your banker to provide you with one. This can save time and make it simpler to assemble everything you need beforehand.
Whatever your goals for your Northern Nevada business, a loan might be one way to make them a reality. To learn more about how we can help, contact your First Independent Bank relationship manager.