How to Apply for a Small Business Loan

Do you have a business idea in mind? The first step of becoming an entrepreneur is to check if you have enough funds for your business idea. If not, you can also talk to a bank or credit union about getting a short-term loan. Depending on the type of business, you can also get a small business loan.

Below we’ve compiled a comprehensive guide to applying for small business loans.

Step 1: Decide the Type of Loan You Need

Your type of business loan will depend on your business goals. Generally, there are three types of business loans:

– For expansion Traditional term loans come with high borrowing limits and are paid back in lump sums over time with interest.

– For daily expenses Business lines of credit are a flexible form of financing that allows you to access funds for routine expenses like payroll or unforeseen repairs.

– For startups Traditional business loans are difficult to obtain for first-time entrepreneurs. Such people can opt for business credit cards and personal business loans.

Step 2: Check if You Qualify for A Business Loan

Factors like how long you’ve been in business, your credit score, and your annual revenue determine whether or not you qualify for a business loan.

You must have been in business for at least six months to one year to qualify for an online loan. For bank loans, you need to have been in business for at least two years.

Many lenders have minimum annual revenue requirements ranging from $50,000 to $250,000. Consider business credit cards or SBA microloans if your revenue isn’t high enough.

Step 3: Compare Different Lenders

Online lenders, banks, and microlenders — all have different features. Get quotations from each, further understand their process, and then make a decision. Ensure you get a loan with the most favorable terms for your business. Aspects like funding timelines might be important to your company.

Step 4: Gather Documents and Apply

Different businesses must submit different documents while applying for a loan. Here are some common documents that are generally required for any funding application: – Business name, address, and tax ID – Financial statements of the business and the business owner – Names, Social Security numbers, and addresses of the business owners – Information about the collateral – Personal guarantee