Taking on debt is a big deal for any business, and it’s important to understand why and when you should take on new financing. Whether it’s for expansion, covering a shortfall or investing in marketing, the right business loan can help you achieve your growth goals.

Lenders consider a variety of factors when approving business loans. To improve your chances of getting approved, think like a lender.

How much do I need?

There are several things to consider when determining how much money you need from a business loan. Generally, lenders focus on factors like time in business, revenue and sales forecast, cash flow and credit score (both personal and business).

A high credit score and history of on-time debt repayment can help you get a lower interest rate. You can also improve your chances by having assets you can offer as collateral. Finally, you should have a clear idea of how you’ll use the funds to make sure they align with your strategic goals. Lenders may be willing to offer higher loan amounts to businesses they have a relationship with, and the overall application process can be quicker for those that have already worked with a lender before.

How will I pay it back?

The terms and conditions of business loans can vary significantly. Read them carefully to make sure you understand what you are getting into. Be particularly careful when it comes to prepayment fees, which are incurred when you pay off the balance of your loan early and can cost you money in the long run.

Lenders will want to see proof that you can afford your new debt. This may include a business plan or proposal outlining how you will use the funding, as well as documents such as financial statements, bank account statements and tax returns for both you and your company.

Some lenders will also ask for personal information for any owners who own 20% to 25% of the company, such as their name and social security number.

What type of loan do I need?

The type of loan your business needs depends on your financial goals. Traditional term loans can fund a single large purchase or expand your company, while line of credit financing offers a flexible way to cover daily expenses.

While the specific requirements for a business loan depend on the lender, most require basic information about your business like its name and location, as well as documentation of its revenue and finances. Some lenders also ask for personal financial information from all owners of the business, including bank statements and tax returns.

To ensure your application is complete and accurate, consider working with a financial advisor. They can double-check all the information and documents you’ve provided and help your lender understand your goals for the financing.

How do I find a lender?

A business loan is a major financial decision that should not be taken lightly. Getting the right type of financing at the right time can help you achieve your long-term growth objectives while also strengthening your company’s finances and creditworthiness.

Lender requirements vary by lender, but they typically look at your credit score (personal and business), time in business, cash flow and annual revenue. They may also ask for documents like a business plan, proposal and financial statements for you, your company and its owners.

You can find lenders by evaluating your needs and researching online or at banks in your area. Be sure to ask if the lender works with your industry and what their minimum credit score is. This will save you from wasting time on a lender that won’t work for you.

What are my options?

Business loans are a great way to finance a growing business or help weather economic downturns. However, there are a number of factors that should be considered before applying for a loan to ensure you make sound financing decisions and can repay the debt on time.

Different lenders offer varying terms, rates and eligibility requirements. For example, bank loans typically have longer application and underwriting processes than alternative lenders, but may provide lower interest rates.

If you’re trying to decide which type of loan is best for your business, consider speaking with a financial adviser. They can help you understand the different types of business loan options available and recommend a lending program that fits your business goals. They can also help you create a plan to manage your debt and stay profitable in the long run.