When to Consider a Small Business Loan

Find the Right Timing for Your Small Business Loan

Many entrepreneurs use personal savings and credit to cover their initial costs because it can be difficult to get a business loan for a startup without a proven track record and credit history. However, relying on credit cards with high interest rates and low credit limits is not a sustainable situation. Applying for a personal loan can help by providing more funds at a lower interest rate than a credit card. But there are significant advantages to having a business loan, so most entrepreneurs should not rely on personal loans indefinitely.
“The responsible use of business loans will help build financial credibility for your company, which will open doors for other opportunities that can help you grow and expand - such as higher lending limits, and trade credit with vendors and suppliers,” writes LendingTree.com contributor Ashley Sweren.

Figuring out how and when to transition the bulk of financing from your personal loan, credit, or savings to a business loan becomes much easier when you have built a strong relationship and work closely with your financial institution. The EFFCU Business Services team can look at your business plan and finances and tell you what types of loans are available to you. It may be that you can currently get a business loan with a favorable rate and don’t have to delay. If you aren’t likely to qualify right now, Business Services can help determine what steps you can take to become a better candidate in the future.

It’s important to note that you should not wait until you are in dire need of funding to begin your loan application. Obtaining a loan is not instantaneous, so don’t wait until a large piece of machinery breaks or you run out of inventory before beginning your application. Waiting could mean an interruption in business operations and a potential loss of income.

Furthermore, waiting too long could actually have a negative impact on your application.

“The truth is, it’s easier to secure a loan or a line of credit when you don’t need one rather than waiting until the situation is dire,” states Ami Kassar, CEO and Founder of MultiFunding.com and Guest Writer for Entrepreneur. “If your business is doing well – you have accounts receivable, industry growth is strong, and you have good credit – now is the time to consider a loan or a line of credit.”
Small, community-based financial institutions like Education First are historically known to be more business-friendly than big, national bank chains, so they are a great place to go to discuss this issue further. If you would like to learn more about possibilities for your small business—even if you don’t need a loan right now—reach out to Education First FCU's Business Services Department to begin building a positive relationship that could lead to a more profitable future.