If your small business needs a loan, especially during these difficult times due to the coronavirus pandemic and economic shutdown, it can be tempting to accept the first opportunity that comes your way. But not every small business funding solution will be right for you. Every business is unique, every situation is unique, and every industry is unique.

The biggest risk in choosing the wrong loan is burdening your small business with unnecessary debt, which then pushes your business into a vicious cycle of debt and cash flow needs. If you do not carefully plan out your business needs before choosing a loan option, you might also leave thousands of dollars on the table your business could have used to operate smoothly.

While there are many different factors to consider, start by asking yourself a few simple questions. Answering these 4 questions can help you figure out which lender is right for you:

  • How much money do you really need?

Before beginning any application process, it is important to know exactly how much money you need – being both flexible and realistic in the range you are requesting. You need to make sure that your business can handle the loan amount you are taking on. The bigger the loan, the bigger the payments. You want to avoid taking on more interest than your business can handle.

  • Why do you need a business loan?

Another critical question to ask that affects all other parameters is determining what the loan will be used for. Business loans are typically used to fund equipment purchases or to launch new products and services, but there are many other reasons business owners apply (e.g. manage seasonality, increase inventory, boost cash flow, pay for renovations, cover payroll, etc.). To make sure you settle on a loan that is the right amount, think carefully about how you intend to spend what you are being offered.

  • How soon do you need working capital?

If your business is in a tight situation, getting cash a few months down the road may come all too late for your business. Keep in mind, the quicker you need the cash, the more expensive your loan options will be. If you are able to wait a few weeks or months, you will likely have substantially more affordable options to choose from.

  • What are the future goals of your business?

Finally, what are your future financing needs? Once you receive a business loan, will your business still need additional working capital down the road to support further growth?Some business owners make the mistake of not requesting enough capital, taking on a burden of debt and later discovering they still need cash to grow. The key is to project your cash flow needs over the next three years before choosing a lender.

Everyone’s circumstances are different, every business’ needs are unique. So, before you choose a lender and settle on a funding option, make sure it is for the amount you really need, and that you will receive capital when you need it most.

Author Bio: Michael Hollis is a Detroit native who now lives in Los Angeles. He is an account executive who has helped hundreds of business owners with their merchant cash advance solutions. He’s experimented with various occupations: computer programming, dog-training, scientificating… But his favorite job is the one he’s now doing full time — providing business funding for hard working business owners across the country.