The state of Delaware boasts of over 68,000 small businesses, and among them, 45,000 companies are run by full-time entrepreneurs without employees. It experiences faster establishments of new companies annually. Hence, this has popularized entrepreneurship among people of different ages and gender. A secure financial background is essential in establishing and running a successful business in Delaware. Therefore, company owners go for Small Business Loans designed to assist them in running their ventures efficiently. In this post, we discuss how to apply for a small business loan in Delaware when running a startup company. Continue reading to learn how:
What to Consider before Applying for a Small Business Loan
Before you even attempt to apply for a working capital loan, it’s vital to have a clear plan of how you’ll use the money. It’s common to find many entrepreneurs who take loans only to end up using the cash on superficial expenses that do not benefit their businesses. According to Strategic Capital, any successful small business owner will emphasize on the importance of having cash in hand to manage operational expenses. Typically, business loans come with a certain level of interest rate, similar to other loan types. Their APR may range from 4% – 15% depending on the lending firm chosen. Also, bad credit scores will automatically attract higher interest rates. Alternatively, some lending firms may deny approving your small business loan when you have weak or nonexistent credit.
Essential Steps During Small Business Application Process
During the application process for a small business loan in Delaware, consider these six essential steps:
Learn About Different Types of Business Loans – It’s vital to acquaint yourself with the available options you have in Delaware. Familiarizing yourself on this topic helps you answer these questions : Which lender offers this? What’s the prevailing interest rate? What’s the maturity duration, and how soon can funding be ready? How safe is it? Choose the Perfect Loan for Your Business – After finding answers to the above questions, consider your current situation. Which small business loan will meet your requirements? If you’re considering a long-term business loan, rule out all the short-term financing options. However, long-term small business loans require some form of collateral, and the best thing to do is apply for multiple short-term loans.
Seek Clarification – It’s prudent to inquire first before submission of your loan application. Ask all the crucial questions that the lender doesn’t explain clearly on their website. If you find any questionable issues such as high-interest rates, choose a more dependable lender. Prepare All the Required Documents – During the loan application process, your financial lender will require various documents. They may include company information, tax details, personal qualifications, reasons for application, certifications, a detailed budget, etc.
Submit the Application – After setting up everything, it’s time to submit your loan application. But it’s crucial to double-check that everything is in order before submitting it online or in a physical office. Prepare for an Interview – It’s crucial to plan for your loan interview the same way you prepare for a job interview. Always remain professional during the meeting since your approach and attitude can break or make your chances of approval.
Assess the Key Terms of Your Loan – After your lender approves your loan, you may choose not to receive the money right away. You have the option to reject it and present a counter-proposal, or switch to the next creditor and apply there. The counter-proposal may involve payment terms, interest rate, prime rate, collateral, limitations on funds usage, and other costs. Stay Put for Their Counter-Proposal – If you choose to use another lender, you have to rewind to step 3. But if you launched a counter-proposal, you’ll only need to review the same features in step 7. After you both agree on the terms and conditions, you can proceed to sign the agreement and wait to receive your small business loan.
How to Apply for the PPP/EIDL Loans During COVID-19
As the COVID-19 pandemic continues to affect businesses in the US, the federal government has provided measures to cushion taxpayers and business owners. Such measures include the introduction of the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Programs (PPP).
i) Economic Injury Disaster Loan
The US government has set aside a $10 billion stimulus package dedicated to the EIDL program. Applying for this loan is very simple when you visit the SBA website. Here are the eligibility requirements for the EIDL program:
- Small businesses that do not exceed 500 employees
- Any private nonprofit corporations that do not exceed 500 employees
- Tribal firms, employee-owned enterprises, and cooperatives
- Independent contractors and proprietorships
ii) The Paycheck Protection Program(PPP)
The CARES Act offers a massive $349 billion SBA stimulus fund dedicated to financing the PPP program. It guarantees businesses the much-needed loans to cover an 8-week payroll, utility, and rent costs. Eligibility for PPP includes:
- Small businesses with no more than 500 employees
- F&B businesses categorized as “Food or Accommodation Services” having not more than 500 employees
- All 501(c)3 nonprofits not exceeding 500 employees
- Independent franchises
- Tribal businesses as well as 501(c)9 veteran firms
- Self-employed workers, sole proprietors, and independent contractors
The deadline for application of the Paycheck Protection Program for SBAs is set on June 30, 2020, when the program officially concludes. As a result, lenders have ceased accepting new applications from small business enterprises. However, should the government avail more funds, you can fill out the application form on the SBA website with explicit instructions. When you choose the Economic Injury Disaster Loan, it costs you nothing to apply on the SBA website. To apply for the EIDL during this COVID-19 pandemic, fill out the form and submit it at the SBA EIDL Loan platform.
If you’ve been wondering how to apply for Small Business Loan Delaware, there you have it. Understanding the application process and the essential steps involved is critical in getting your small business loan approved expeditiously. According to Tony Gorman’ post, Delaware’s small businesses are also benefiting from the PPP and EIDL programs during this CORVID-19 pandemic.
The PPP loans assist SBAs in managing payrolls and cover rent and utility bills for up to 8 weeks. But even though the EIDL program faced many teething problems, it’s gradually regaining its footing after significant improvements in its website and customer service.