We often hear from businesses who need capital urgently. Some of the most crafty businesses, however, seek capital without urgency. What are the top three reasons to apply for capital before you need it?
1. Determine Your Borrowing Capacity
Your business is always evolving. Likewise, lenders’ borrowing standards fluctuate with the market. Applying for capital allows you to determine how much money you could borrow based on your current operations. This can be used as a guide if you’re planning for big growth opportunities while gauging how difficult it may be for your business to secure the amount of capital you may need.
2. Understand the Cost of Capital
In addition to understanding how much you can borrow, it’s important to understand how much that capital would cost. The cost of capital, often reflected in interest rates, fluctuates with the market and your business’ track record. Understanding how much a loan costs can help you evaluate opportunities that may require capital deposits in the future.
3. Establish Relationships
Many small businesses don’t have strong banking relationships to rely upon. Starting those relationships while you’re in a precarious cash situation can strain fostering a trusted connection, especially if the lender sees opportunity to generate outsized earnings based on your urgency. By exploring your capital options in advance, you begin your conversation from more neutral ground, allowing you to establish a relationship before you call upon it for help.
The bottom line: applying for capital before you need it allows you to better understand your options, which enables you to plan for growth opportunities with those funds before you realize you are in need.
Not all lenders can offer exact loan sizes and terms without impacting your credit score – this is just one way our platform is different. Our prescreen application provides you with a custom loan offer for your business in 10 minutes without impacting your credit score.