Is it time for a business loan?

To borrow or not to borrow? That is the question most small business owners will have to answer for themselves at one point or another.

Knowing when to take out a business loan is important. Proper timing could mean the difference between meeting your business objectives while growing and managing overhead or struggling to make ends meet and being forced to cut back in areas where you should be bulking up.

Let’s take a look at when it’s time to talk to the bank about a business loan.

When’s the best time?

The answer will probably surprise you. The best time to get a business loan is when you’re not desperate for the money, your cash flow is strong, and you have good credit. Timing it this way ensures you can meet your lender’s eligibility requirements and snag a lower interest rate. The better your financials look, the better your loan terms will be.

If you’re looking to purchase a pricey piece of equipment, consider applying for a loan for those purchases too. Using equipment as collateral can also net you a lower rate and favorable loan terms.

When’s the worst time?

There are several times it might not be advantageous to try for a business loan. Let’s break them down:

• When you’re in a crunch and scrambling to pay bills isn’t a great time to apply for a business loan. Waiting until things are dire puts you in a spot where it could be difficult to make payments on the loan.
• If your credit scores — personal and business — aren’t great, your chances are lower to get approved for a loan. The terms of a loan on shaky credit likely won’t be favorable, either. Work to build a solid business credit score before applying for a loan. (Hint: Your personal credit history matters too!)

If you have questions about getting the timing right on a potential business loan, don’t hesitate to reach out to the Small Business team here at UBT. We’d love to discuss your options and make sure you’re timing it perfectly.