Editor's choice: First Down Funding business loans
- No prepayment penalties
- Competitive rates
- Works with bad credit and most industries
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As the owner of a consulting company, it’s your job to stay on the cutting edge of business trends. And with such a fast-growing industry, you need the flexibility to face new challenges every day.
When you need to jet across the country for a client, move to a bigger office or pay for a new marketing campaign, a business loan can help you cover the upfront costs while you wait for the money to roll in — sometimes called a professional business loan.
First, figure out how much you need to borrow and what it’s for. Need funds for overhead expenses if a payment gets delayed? Come up with a liberal estimate of how much you might need. This will help you narrow your search by loan type and amount.
Next, make sure your business is eligible. Banks can have stricter eligibility requirements than other lenders, and if you’re applying for a large amount of funds, your business will need to bringing in a high amount of revenue each month. You might have trouble qualifying if your firm is less than a year old or doesn’t have a positive cash flow.
Once you’ve found a few lenders you’re eligible for, compare the costs. For factoring and financing, this means comparing fees. Otherwise, you’ll want to look at your loan’s APR, which is a representation of the loan’s interest and fees as a percentage.
Your APR and loan term — the amount of time your business has to pay off your loan — determines two things: Your monthly repayments and your total loan cost. Longer terms lower your monthly repayments but up the total cost. You might want to go for the shortest monthly repayment your firm can afford to lessen the overall interest.
Getting the word out about your firm and keeping up with technology are essential to consulting firms, but hiring and keeping talented team members is often the top expense. Let’s take a look at some costs you can cover with a business loan.
While it depends on what type of financing your consulting company needs, most lenders ask for the following documents and information.
Since consulting firms tend to be high-revenue and low-cost, your business might not face as many challenges as others. Younger firms and individual consultants might run into a few roadblocks, however. You could have trouble qualifying for a term loan or line of credit if you’re still building up your client base and don’t have enough regular revenue. Instead, you might want to look into options that don’t rely on a steady monthly income like invoice factoring, financing or a business cash advance.
Another roadblock might also be age. Lenders generally like to work with businesses that are firmly established — young companies tend to fold at a higher rate. You might not be able to get the best deals if your firm is just a year or two old. Anything younger than that can have real trouble finding a competitive loan and might want to consider venture capitalists, selling equity to angel investors or even crowdfunding.
Running a successful consulting business takes money that your business might not have upfront when you rely on invoices. Growing your firm can cost even more. Business financing can help cover both of these costs — though it isn’t free. To learn more about how business loans work and to get started on your search for a lender, visit our guide to business loans.
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