The Best Time To Apply for a Business Loan

Any kind of new startup starts with the same basics:  Background research and market testing to see if the product or service has a sustainable potential customer base; how much the startup can qualify for in seed money; where that money might be coming from; and, most importantly, the best time to be applying for loans and seed money from either the private sector or from government funding agencies. Timing is an essential ingredient in the financial success of every initial startup. Experienced entrepreneurs insist that this is the only way a successful startup can begin.

In North America, specifically in Canada, a new business owner needs to have been operating for a minimum of six months in order to be able to seek for either a Merchant Cash Advance or the government Small Business Loan, but the timing of the application can make that particular prerequisite of less than significant importance. A transaction history that indicates even a month or two of timely financial responsibility with both customers and vendors will be of great worth to even the greenest of business owners. What lenders look for more than anything else in a brand new operation is transparent financial operations and a constant stability that indicates monetary maturity, no matter how small the operating capital initially may be.

The importance of a good credit history

Never walk into a lender’s office without a spotless credit history to display. While a personal credit history may be less than stellar and still allow borrowers to obtain seed money and credit, any business hoping for a sizable loan must had an absolutely spotless credit record going back at least two years, or since the inception of the corporation or limited liability partnership. Financial officers today are willing to overlook a bit of youthful indiscretion when it comes to personal finances, but they remain intolerant of professional business credit failures and will not offer a single penny to any business that does not possess a sterling credit history. In Canada, a free credit history is available at Credit Canada.

Remember seasonality

A seasonal business, one that is tied into a holiday such as Christmas or a season such as summer, needs to be aware, of course , of when peak consumer purchasing is likely to occur, and to time their applications for loans accordingly. This is what the Merchant Cash Advance lending program was specifically set up for. This allows for much more flexibility in making up an annual business budget. During slow sales months, repayments can be lowered or even dispensed with altogether.

Application timing

Applying for a loan when business is in a seasonal or cyclic slump is not a good idea. Lenders traditionally look for strong performance before they open their purses. So the smart business owner plans to apply for loans when their business experiences a sudden surge in sales or when the peak sales season starts. That’s smart timing.

Once a business has established a relationship with a lender and show that it can pay back loans on a timely basis, a business owner may then feel more confident in going to see their lender for unexpected downturns and emergencies.



David Jackson

David is a personal finance expert, a professional male model, and an entertainment writer.