The big, emergency SBA loan programs for small businesses (like yours) that were launched (PPP) and expanded (EIDL) over the last couple of years are moving back from the radar or wrapping up.
That said, there are still great options for funding your Harris County business.
Including NEW government programs (like the SSBCI, for one — more about that from me later, as it becomes more available), there are a veritable panoply of small business loan options.
And just so you know, the last 2 years has made us VERY good at wading through the murk and mire of these things, so feel free to grab time with us here:
But BIG PICTURE: Don’t enter into the commitment of a business loan lightly.
Good management of your loan starts with knowing what you’re getting into.
(And perhaps having somebody who is good at this stuff in your corner. *Clears throat*)
Edward M. Gardner PC CPA on Managing Small Business Loan Options
“Always borrow money from a pessimist. He won’t expect it back.” – Oscar Wilde
First, make your overall credit situation shine bright – look up your credit score, for one. Forewarned is forearmed, and you don’t want any surprises when you sit down at that lender’s desk. The better your credit rating, the better the loan terms you’re likely to get.
And take it easy on how many loans you apply for at once. Yup, it’s true – each application can actually ding your score. Instead, find out as much as you can beforehand about each lender’s criteria for granting loans and apply strategically for a few where you have the best shot.
While you’re at it, keep an eye on acquiring new debt and look for ways to consolidate your existing loans (such as transferring your company’s credit card debt to a zero-interest account). Also, be on the lookout for ways to cut costs, even temporarily.
No such thing as free money
When somebody hands you a small-business loan, it’s thrilling – sometimes such a thrill that you actually forget that you’ll eventually have to pay that money back. Nothing’s free, right?
Make sure you’re crystal clear on the real cost of your loan. What’s the annual percentage rate (APR) and the length of the loan? Those are two of the biggest questions. Start by running some numbers through a simple business loan calculator.
Other good questions:
- What’s your collateral? What are you laying on the line here?
- What are the penalties for late payment or pre-payment? Yup – you can get punished for giving some people too much money too soon. Turns out that you getting the loan off your plate early can cost the lender big bucks in interest. Check out both these questions before tinkering with your payment schedule.
- Have you thought about a line of credit rather than a loan? You get access to a max amount you can tap as needed and then repay over time. Often you only pay interest on the cash you actually use.
A borrowing buffet
While we’re on the topic, there are all kinds of small business loans options– and even grants you don’t have to repay.
For instance, you could go after a working capital loan for your short-term financial needs, such as expenses during down sales cycles. These loans can be quick to get – but interest rates tend to be high with these loans and the debt can even become a personal debt liability for you the owner. Risky business…
Money for your Harris County small business might also be waiting in some unusual places. Believe it or not, Walmart Inc. offers a ton of grants to businesses. The U.S. Treasury also has a Community Development Financial Institutions Fund with a list of local resources that can help small businesses like yours, especially in certain industries and sectors.
You’re approved – Now what?
So, you’ve chosen a loan from the plethora of small business loan options, and you’ve signed on the dotted line. Job done, right? Well, not so much.
Track spending. Did you have plans for the money? Sure, you did – anything from good intentions in your head to a detailed, written schedule. Now, follow the plan. Keep the loan separate and distinct in your accounts and spend the cash on what you planned to spend it on. Do not dip into it for personal expenses or for other business costs.
Track your balance. Set up a recordkeeping system that’s clear to you – maybe an Excel spreadsheet – and stay on top of what you’ve paid on both the interest and the principal. Keep your lender up to speed on what’s happening in your business (especially if you hit bumps in the road), and see if you can make it really easy on yourself by automating payments.
Loans can be a big help to your Harris County small business – but it takes work. If we can lend a hand (no pun intended), don’t hesitate to reach out. We’re here for you.
In your corner,
Edward M. Gardner PC CPA