When Should You Apply for a Business Loan?

by | Oct 29, 2021 | Business Finance | 0 comments

Applying for a business loan is a significant financial step for numerous small businesses. You might be looking to expand your office space. Perhaps you’re thinking about buying out a competitor. You could be looking to increase staff or launch a new product line. Whatever the reason, additional capital is essential to the success of your project.

There are quite a few elements that go into procuring the money you need. These all factor into the business loan process, from putting together the perfect application packet to having collateral if the loan requires it to finding the best lender with which to work. Another aspect of commercial lending to consider is when to apply for funding. That is to say when are the best times for small businesses to go ahead and submit their loan application?

A general rule of thumb is that you might not want to apply when you’re hurting for money. This is because your cash flow position is likely not the best. Your credit may be lower than it needs to be, and you could have other outstanding debts that make it too risky for a lender to take you on. So, when should you apply for business funding for your company? Keep reading to find out more!

Small Business Lending – Timing is Everything

Getting your timing right in terms of your loan application is critical. It very well could mean the difference between you being approved for the loan or your application being rejected. Did you know that, on average, nearly 45% of businesses will apply for a loan during a given year? Alternative lenders have the highest approval rating at just under 57%. The key again is to maximize your strategy in terms of timing. Timing is important! Below are the four best times for your small business to consider applying for financing.

1) During the busy season

There are many businesses out there that tend to be more seasonal. For instance, accounting firms are particularly busy during tax time and can be slower at other times of the year. Or take a landscaping company. Business tends to be booming in the summer months, while winter can be quite a lot slower, comparatively speaking. Applying for a business loan during the busy season is always a good idea when you’re bringing in more revenue than at other times during the year. This way, a lender can see that you have positive cash flow and are in a more comfortable position to start paying back a loan. And, you will have the money at your disposal to help carry you through the slower seasons.

2) Prior to launching a new product or service

Take the example of a spa. They may be going steadily along, sustaining their business and accruing clients, and because of this, they could choose to expand their offerings. This might potentially mean introducing more products that clients can buy. For instance, during the pandemic, several spas segued into the take-home DIY spa kit sector. If you plan to do something by way of a relatively significant new product/service, then applying for a loan could be a great idea. Obviously, you can use the funds to help launch the new initiative, but keep in mind that this new offering will generate additional revenue, thus helping you pay back the loan.

3) During the holiday rush

Around the holidays, things tend to get a bit more hectic for many businesses. You could need to hire more staff to help handle the additional orders prompted by this time of year. There may be specific holiday marketing campaigns involved. Whatever the need or project, there will likely be an additional cost attached, and so here is where a business loan could undoubtedly come in handy.

4) During the slow season

During your busy season may be an ideal time to apply for a business loan, given your overall financial position. Still, many companies find that they need money during the slow season. Sales are down, and you need to figure out how to keep up with expenses. You want to think ahead here and ensure that you are positioning yourself in the best possible way to qualify for commercial funding during the slower times. When you get the loan, use it wisely to sustain your small business until sales start to pick up again.

First Union Lending Works with Small Businesses

We believe in working hand in hand with the country’s smaller businesses in order to help them make it through and ultimately succeed. We offer a variety of fast and flexible loan programs. Call today and let’s get started together!