Once you notice that your business is running out of funds, deciding to apply for a small business loan might sound like the best next alternative. At the end of it all, an influx of cash can help in running business operations, support expansion plans and ultimately assist in increasing income.

However, before applying for that loan you desperately need, it is vital to understand that you will be held responsible for loan repayment regardless of what happens.

Here are the four things to consider before securing a small business loan for your company

  1.    Know your credit score

If you want to secure a loan from a traditional creditor, note that your credit score is one of the primary factors to be considered. Therefore, before contacting any financial institution, knowing your figures is vital. The only way to understand your credit score is requesting a personal credit report from the relevant credit bureau. Once you get the report, check out for errors like the payments made on time but reported as late. If you come across any mistake, get in touch with the credit bureau and company involved to resolve the matter.

Note that if you have a high credit score, you have an excellent opportunity to get a loan with an attractive and lower interest rate.

  1.    Understand the available alternatives

Bear in mind that there are numerous lending options such as traditional and nontraditional lenders. Another new alternative is OnDeck, a financial platform that looks forward to extending loans to small business. While the interest rate that is offered by OnDeck will be significantly high than the current average rate, you will as well realize that the approval process is much faster than at any financial institutions. On top of that, you will begin repaying the loan in small increments each day. This is a good idea since it will reduce the risk of missing a bigger monthly repayment that may come with a loan obtained from a bank.

Another option you need to consider is a merchant cash advance, which is usually based on the future credit card sales. Although you might expect higher interest rates and charges with merchant cash advance, there are numerous perks to take into consideration. Even if you have a bad credit score, getting approved for a merchant cash advance is easier. Once your cash advance loan is approved, you will receive the funds immediately. The good thing about cash advance loan is usually based on your income.

  1.    Understand your business needs

In case you are not certain how much your business requires to operate or grow, consult an accountant before approaching any lender. Make sure you are prepared to present documentation to back up your request and to respond to the creditor’s questions regarding your finances, business model, and plans. Also, make sure you are well prepared to explain exactly how you intend to use the funds you borrow. For example, you may demonstrate how the funds will be used to buy materials, establish a new location or pay additional staff.