3 Benefits of Pre-Qualifying Early for Small Business Financing

There are few journeys in life as exciting as owning a business. Becoming your own boss, taking control of your finances and making your mark on the economy are all thrilling milestones you can accomplish as a business owner.

Obtaining small business financing is the first step to making these goals a reality. While some may put off financing for fear of being rejected, funding is actually one of the best places to start your entrepreneurial journey, and the first step should be getting pre-qualified. A comprehensive pre-qual tool will tell you your chances of being approved for financing, as well as provide a funding estimate and a list of funding methods you will likely be approved for. Guidant Financial’s proprietary pre-qualification tool, for example, allows you to determine your eligibility for small business financing without having to go through a rigorous application process.

There’s no harm in getting pre-qualified early – even before you’ve chosen the business you want to start or buy. Take a look at some of the benefits of pre-qualifying for business financing early in the process of buying or launching a business:

1. Pre-qualifying gives you a full view of your small business financing options.

When you’re starting out in business, it can feel like much of your day is spent making decisions. After all, the responsibility of making wise decisions falls on your shoulders, so it’s important to understand your options so you can choose wisely.

The same is true of small business financing. Having access to capital to start and grow your business is a must, and in order to make the best decision, you need to understand all the methods that are available, as well as the impact they’ll have on your business long-term (think interest rates, monthly payments, etc.). Fortunately, understanding your financing options upfront can be simple by taking the time to pre-qualify.

Guidant’s proprietary pre-qualification tool only takes a few minutes to complete, and when you provide basic financial information, you’ll instantly receive a full summary of your small business financing options, your maximum funding amount and a comparison chart of your pre-approved programs so you can see how each method differs.

Having this information readily available gives you the ability to narrow down your options as you begin the search for your perfect business. And if you already know exactly what kind of business you want to launch, understanding your financial capacity can help you make strategic decisions on how to grow the business from the start.

2. Pre-qualifying allows you to choose businesses that are within your budget.

Many people start their journey to business ownership after they’ve determined they’re ready to make the leap, but they haven’t yet decided what kind of business they’d like to launch or buy. This is where pre-qualifying for financing can come in useful to help you determine your business budget and narrow down which businesses fall within your financial limits.

Not surprisingly, the cost to start a business varies widely depending on the type of business you’re hoping to finance. For example, franchises typically cost more upfront because of the fees paid to the franchisor as well as the upfront marketing and material costs. Starting a new business can cost less upfront since you can control how quickly you will scale the business (though marketing and material costs will come into play later down the road). It’s also almost always more expensive to launch a brick-and-mortar business compared to an online company or one that you can run from home.

Before choosing your business model and industry, determine how much small business financing you’re qualified for so you don’t pursue opportunities that are out of reach.

3. Pre-qualifying offers insight into the financing options you’re most likely to be approved for.

Not only does early pre-qualification give you awareness into the many different types of financing, but it also provides an initial idea of what funding methods you may be eligible for, which can save you valuable time.

Small business loans, for example, have a lengthy application process that includes completing a loan package and business plan for every lender you’re applying to. If you don’t meet the lender’s specific criteria, you could be denied for financing, meaning you spent weeks working on an application only to have it rejected. But if you had pre-qualified, you might have known sooner that you didn’t meet the lending criteria, so you could have focused your time improving your attractiveness as a borrower rather than filling out paperwork.

For those who don’t meet the minimum credit requirements for a business loan, or who don’t want to use their personal savings as a down payment on a loan, pre-qualification also educates you on other funding options that may be a good fit. You may even learn of alternative funding methods you didn’t realize were available, which is often the case with 401(k) business financing. This type of funding is not a loan, and approval is based on the amount of rollable retirement funds you have available.

Starting your business on the path to success is as simple as answering a few questions in the pre-qualification process. Pre-qualify for business financing today to learn the types of funding you’re qualified for, your maximum funding amount and gain a better understanding of your future as a business owner.

Computers and tablets displaying business financing options next to a businessmen peering out over text asking if you need to prequalify click the image to find out what you qualify for today

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