Did you know the timing of your business loan application can impact your approval, interest rates, and repayment terms? If you want the best business loan possible, apply when you have financial momentum.
Think of it like riding a bike. You’d rather start your bike ride by gently coasting from the top of a hill than having to painfully pedal your way up an incline. Lenders look at your financial momentum the same way. They would rather work with financially sound businesses with cash flowing than one that is struggling to move forward.
Capitalizing on your financial momentum to secure the capital you need is simple with a plan. Look for opportune times when your business has picked up speed and before you’re facing a bumpy road. To get your roadmap started, here are four examples of loan application times that maximize your business’s financial momentum.
Before a Growth Phase
One of the smartest times to secure funding is when you are expanding to a second location, ramping up your marketing campaign, hiring new staff, or launching a new product. New growth means new expenses and new revenue.
Lenders appreciate strategic thinking. Applying with a clear growth plan demonstrates you are using the loan as a tool. You are preparing to cover the additional expenses from your new growth and anticipating an increased return. Your strategy lowers the risk for lenders, making you more likely to be approved and secure favorable terms.
Say your small animal clinic is consistently booked out for three or more weeks. You could see more clients if you hired additional staff. Rather than waiting until you need to cover payroll to apply for funding, you could secure a top veterinary business loan before your new hires start working. Because your current financials are sound and don’t appear stretched, you’ll pay less in fees and interest for your financing. And with favorable loan terms, you can move forward without feeling stressed.
After a Strong Performance
If you’ve just had a strong quarter or several months of solid revenue, that’s an ideal application window. Lenders look closely at your recent financials to assess risk. You are in a prime financial position to apply for financing when your books show consistent income, healthy cash flow, and stable margins.
Strong performance signals that your business can repay the borrowed funds, reducing the risk for the lender. They can offer higher loan amounts, lower interest rates, and better overall terms when you’re a low-risk option. This is especially true if you’ve recently secured a large client, completed a successful campaign, or seen year-over-year growth. If your financials are especially strong, you may even qualify for pre-approved offers.
Don’t wait for performance to dip to apply for the funding you need. Leverage your momentum while it’s at its peak.
During a Seasonal Slow Period
Many industries have predictable slow seasons. A lawn care company sees a drop in demand during winter, and a retail business quiets down after the holiday rush. You may think this is when momentum has died, but these slow periods can be an excellent time to apply for a loan and prepare for the next cycle.
During off-seasons, you have more time to focus on your business’s future rather than its day-to-day operations. It’s a flat stretch before the next hill. You can review your performance and invest in the future, like equipment upgrades, product development, employee training, or marketing campaigns.
You aren’t short on cash after your peak sales, and lenders can see how funding you now will result in more profits in the next season. Applying now gives you the cash cushion to seize opportunities rather than playing catch-up once things ramp back up. You have time and leverage to shop for the best commercial lenders, handle multiple applications, evaluate your funding offers, and secure the best terms.
Before a Trouble Spot
It’s tempting to wait until cash flow is tight to start looking for financing. But that approach usually backfires. When your revenue is declining, lenders see you as a higher risk. That can mean lower loan offers, higher interest rates, or outright rejections.
The best strategy is to anticipate your financing needs. Maybe you typically see a slow quarter this time of year, or expenses usually spike in the coming months. Apply before your usual trouble spots while your financial profile is still strong.
No one can predict the future, and some trouble spots spring up out of the blue. You can’t predict when your restaurant’s oven will break or a freak storm will freeze your trucking company. But you can still apply for financing early. Rather than waiting to see how long you can survive the emergency, secure a quick business loan to address the problem promptly and give yourself a financial cushion.
Apply According to Your Business Cycles
No one knows your business better than you. You understand when sales rise and fall, when clients pay late, when your customers want a new product, and when big expenses are due. You are the expert on this trail. Use your knowledge to map out your financial momentum and apply for business loans when the timing will propel you forward.