Considering a Small Business Loan in Arizona? What to Ask Before You Apply

August 25, 2022

A recent report from State Policy Reports ranks the state of Arizona third in the nation for economic momentum, making it one of only four states to exceed the national average by more than 2%. Even as economic conditions fluctuate, entrepreneurs and small businesses remain an important part of the state’s forward progress. 

If you’re one of Arizona’s many entrepreneurs, you may be wondering how to make the most of the current cycle of growth and recovery. Your banker can help you chart your course.

Financing can make all the difference for Arizona companies aiming to capitalize on the state’s opportunities. That means, at some point in the life of your business, you may consider applying for a small business loan. Perhaps you have unexpected expenses, need cash flow or want to purchase new equipment. Whatever your goals, it’s helpful to have a clear understanding of your needs before you approach lenders. 

Here are some questions that might help you decide whether applying for a business loan is a good move for you right now.    

What type of loan is best for my business?
When researching your loan options, you may turn up some you didn’t know you had. A revolving line of credit might suit your situation best if you are facing unexpected costs. Want to cover startup costs? Small Business Administration (SBA) lending programs like SBA 504 or 7(a) could be the way to fund your business. Need to make an equipment purchase? Equipment term loans could be a good solution. Seeking to expand to a new location or add real estate to your asset portfolio? You may want to consider a commercial real estate loan. 

How will I use the money? And how will I pay it back? 
You might be surprised how many would-be borrowers don’t ask themselves these two crucial questions. It’s a good idea not only to ask but to formulate a clear and detailed answer before approaching lenders. Will a small business loan drive growth in revenue? You may want to estimate how much. Will it help you reach new customers? It’s useful to try to set a goal for how many. Lenders know that careful planning mitigates risk. Showing that you have a plan to use your loan wisely and repay it on time helps them do just that.

What kinds of terms work best for my situation? 
Before you seek financing, it can be helpful to think through variables such as the length of the loan and repayment terms. Banks like to see that borrowers have a sense of the appropriate use of credit. One rule of thumb to keep in mind: Use short-term money for short-term purposes and long-term money for long-term purposes. Short-term money — which typically comes due within six months to a year — could include a bridge loan to cover operational expenses or meet immediate obligations. Long-term funds mature at one year or more, which may make them a good option for those seeking to purchase fixed assets or equipment or invest in R&D or expansion. It’s a good idea to evaluate your long-term plan and short-term needs and then figure out where financing fits into that overall picture.

Am I prepared to provide all the information lenders need? 
The bank will want to see various documentation before considering you for a loan. This may include your business plan, any relevant licenses in your city or region, tax and payroll documents, personal and business bank statements and profit-and-loss statements. Consider making a checklist, or ask your banker to assist you with one. This can make it simpler to assemble everything you need beforehand. 

Whatever your goals for your Arizona business, a loan may be the right option to help make them a reality. To learn more about how we can help, contact your Alliance Bank of Arizona relationship manager.