So many variables come into play when assessing your chances of securing a business loan – the general lending environment, interest rates, the current and future fiscal health of your business, credit scores, etc. But the time of year can also come into play.
Here are some compelling reasons why the remaining weeks of 2015 might be the right time to apply for the small business financing you need to expand and grow.
Small Business Lending is Experiencing an Uptick
As the economy adds more jobs, according to the New York Times, small businesses are looking to borrow money, and more banks are willing to lend it – to the right borrowers. SBA loans are also experiencing an upward trend with YTD lending volumes exceeding last year.
That’s not to say that we’re back to pre-recession levels yet. Large banks are only approving 20% of small business loans, up 9% from three years ago (before the recession the New York Times reports that levels were at 36%).
That being said, the emerging powerhouses of small business lending are smaller banks. These are currently approving more than half the loan applications that cross their desks.
Take Advantage of Year-End Deals
While the lending market is slowly getting its health back, it’s not there yet, and banks know it. This is where business borrowers have the advantage. Banks are in business too and like all sales organizations want to close the year strong. This means there may be some sweet deals out there before the end of the year for small businesses looking to fund growth in 2016.
Consider shopping around for low rates – talk to banks big and small and weigh up your priorities. Big banks may offer lower rates, but they can be bureaucratic. Smaller community banks are geared towards understanding and supporting the neighborhoods in which they’re located, and might be able to offer a relationship that’s more mutually beneficial.
Interest Rates are Still Low – For Now
Interest rates have been kept low to boost the economy, will this continue into 2016? If inflation rises, then interest rates may follow. Now might be the time to take advantage of current interest rates, before they expire.
If you find that you don’t qualify for a traditional bank loan, SBA loan programs offer lower interest rates and guarantees (which alleviate the peril to lenders of taking on higher risk borrowers). Interest rates on SBA-backed loans are negotiated between the lender and you. However, the SBA does apply maximums to these, plus 2.25% for a loan that matures in less than seven years (2.75% beyond that). The SBA doesn’t fund the loan, the bank does, so talk to your branch first, they can help you select the right loan and assist with the application process.
Don’t Forget to Have a Financial Contingency Plan
Year-end planning aside, the absolute best time to borrow money is before your need it!
Hopefully, you have a business plan that accounts for any major financial scenarios on the horizon, but businesses also need to plan for the unexpected such as a sudden need for additional inventory or potential cash flow issues. Take steps now to ensure you can cover these costs, before it’s too late and you’re forced into a hasty, high-interest loan. You can take advantage of cash flow management services from Fundbox. Fundbox offers business owners a simple way to fix their cash flow by advancing payments for their outstanding invoices. Read more about how it works here.
Still Not Sure if You’re Ready to Borrow?
Regardless of the time of year, if you can check the boxes against any of the following then the time might be right:
Your industry is doing well
Your business is turning a profit
Cash flow is steady and building
You have good credit
On the flip side, if you’re struggling to make payroll or cover other business expenses, any bank will be hesitant to touch you. This is where taking out a line of credit before a crisis occurs can be a life saver. Alternatively, consider services like Fundbox to help tide you over.