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How To Get A Business Loan In 6 Simple Steps

March 25, 2021
Bill Kimball

applying for business loan

There are several different types of small business loans available today, many of which are designed for certain types of businesses or to meet special financing needs. If you’re brand new and looking to cover working capital, for instance, your options will be more limited than if you’ve been in business for years and have a strong track record.

Invoice factoring is when your company sells its invoices to a factoring company for cash. The factoring company gets paid once your customers pays their balance.

To help purchase the expensive equipment needed to run your business, banks and other creditors can advance you up to 100% of the value of the equipment, which you then repay with interest. Some new entrepreneurs assume they have to get a small business loan from a large, national bank.

Set up a free Nav account and then feel free to reach out to our Credit & Lending Specialists. ABOUT AUTHOR Linsey Knerl Linsey Knerl is a Midwest-based author, public speaker and member of the ASJA. She has a passion for helping consumers and small business owners do more with their resources through awareness of the latest financial and tech services. Instead of providing all the documentation for your own business, however, you’ll need to include the same type of information for the company you’ll be buying. Other lenders won’t give you any indication of your approval until your months into the process and sign those final papers. Whether on paper or online, this is how you finish the process. We’d love to hear from you and encourage a lively discussion among our users.

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  • There are also repayment terms beyond the structure of the loan to look out for, Misheloff said.
  • They are often not fully repaid for several years, but they have low monthly interest rates.
  • And because most small-business owners don’t have business credit, personal credit is that much more important.
  • Typically, small business lenders look for borrowers with a credit score that’s at least in the mid-600 range.

Unsecured business loans are loans that don’t require collateral. Most business credit cards and lines of credit are unsecured loans. To cut through the noise and help you secure financing for your business, we’ve combed through all the loan application requirements for business loans so you don’t have to. The recently funded Paycheck Protection Program offers small businesses a way to meet payroll needs with financial aid from the government. This aid is only being provided through the SBA and its authorized lenders.

Note that credit bureaus don’t differentiate between business and personal inquiries. If you use your personal credit history, your credit score could be affected when applying for a small business loan, which is why it’s important to go with your best bet. Banks have some of the strictest application requirements, but you will likely pay lower interest rates and fees than other financing options—provided you qualify. Startups may find it a bit tricky to get business financing from many major lenders.

Shop The Lenders That Offer The Type Of Loan You Want

The products may be provided by third parties and subject to lender approval. In California, loans made or arranged pursuant to a California Financing Law License. In order for businesses to run smoothly, they need on-hand cash to cover expected or unexpected expenses. Working capital loans can give your business access to cash when you need it most to cover these crucial expenses.

Find out what kinds of offers various lenders will be able to give you, and use those interest rates and fees to estimate your payments. All of this information should be included in your financial statements, but you should also add up all of your payments to see how much the loan will cost you. Know all of the terms and conditions attached to each loan offer before you decide which one will be best for you, and be able to show the lenders that you are a good investment. When you have completed the financial statements and your business plan, you should have a clear idea of what you want to accomplish with the loan and how much you will need to reach your goals.

While you can typically be approved quickly, you are likely to face high interest rates and/or brief payback periods. To receive the best loan offers, a score that is at least in the high 600s is required for many business loans, including loans from the Small Business Administration and banks. However, some alternative lenders will give loans to borrowers with scores as low as 500. A lower score may result in fewer options and higher costs over the life of the loan in most cases. When applying for a regular term loan at a bank, you need to put up assets to secure the funding.

applying for business loan

Advertised as low as rate is effective as of April 1, 2020 and is subject to change. Your actual interest rate may differ based on your creditworthiness, overall business relationship with Bank of America and line amount. Make your dream business a reality with loans designed for new ventures. We want to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and safe by following our posting guidelines, and avoid disclosing personal or sensitive information such as bank account or phone numbers.

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. We believe everyone should be able to make financial decisions with confidence. will look at past sales, expenses, and future reporting, too.

Come up with a plan that you will follow, and show projected numbers so that your lenders can see your goals clearly and know that you will be able to make enough money to pay them back. It’s also wise to have an attorney review any loan documents before you sign them. Finally, when accepting a loan, always have a clear strategy to pay back the lender.

Types Of Good Credit Loans At Lendio

Overall, banks can offer a variety of business loans, everything from traditional term loans to business lines of credit to equipment financing. Ultimately, bank lenders will provide business financing with the best rates, terms, and amounts. This being said, it can be very difficult for most small business owners to qualify for a business loan from a bank. On the whole, you’ll need excellent credit, a few years in business, and a significant annual revenue in order to qualify for abank loan for your business. When you apply for a business loan, your personal credit score will usually be one of the first things that a lender looks at. If you have a high personal credit score, you’ll be more likely to qualify for a variety of loans—and loans with the best rates, terms, and amounts.

Post PPP, a business cash advance will likely be one of the only available financing options for many businesses for the next several months. Available amounts are based upon revenues and can range from $5000 – $250,000 or more. Even those with less-than-perfect credit can get approval, provided they have the transactions to justify the advance, and the turnaround time is often within 24 hours. banks and credit unions are a good option when your business is well established with strong sales volume and cash reserves, and you have a good personal and business credit profile. They are not a good choice if you need the financing quickly, as the application and funding process can sometimes take several weeks, or even months. Depending on the business need you’re trying to fill, there will likely be more than one option that will meet your need. Many lenders prefer to lend in larger amounts and some lenders prefer to work in specific industries.

applying for business loan

Some lenders will give you a loan based on deposits made over a period of time. Whether you’re new to building credit, or you’ve made some mistakes in the past, it can be frustrating to apply for business credit with a poor credit profile. Bad credit doesn’t have to keep you from getting funding, however. They include merchant credit accounts, business cash advances, secured business credit cards, and some microloans. ” is that you need to be prepared to include any piece of paper or electronic document that you used when coming up with your business plan and financial statements. Banks won’t take your word for it that you will be profitable and can pay the money back.

When To Get A Business Loan From Microlenders:

A business plan that shows you’ll pay them back is always a good idea. Lenders will want to know that you are running a credible business, and that you have the knowledge and skills required to grow your business into something great. Include absolutely everything that has to do with your business, including your goals, competitors, past and projected revenue and expenses, market analysis, and how you intend to grow your company. Show why you are the best person for the job, and when you have completed all of that, write an executive summary that will draw the lender into your vision. This will be the first thing they read, and it could be the last if they are not immediately interested.

To obtain the statement, please write to National Funding Inc., 9530 Towne Centre Drive, San Diego, California 92121. Funding amount and credit approval is subject to a full credit profile review. Any applications submitted electronically shall have the same force and effect as if the application bore an inked original signature. Invoice Financing.An invoice financingcompany advances you a percentage of the value of your outstanding invoices, freeing up cash to use for your business. This is an important decision to make—as we’ll soon discuss, certain financial products are better suited for different purposes and some can only be used for specific purposes. To find the right business financing source for you and get the loan you need, follow these steps.

Commercial Real Estate products are subject to product availability and subject to change. Actual loan terms, loan to value requirements, and documentation requirements are subject to product criteria and credit approval. For Owner-Occupied Commercial Real Estate loans , a loan term of up to 15 years and owner occupancy of 51% or more are required. Small Business Administration financing is subject to approval through the SBA 504 and SBA 7 programs. Start by looking at two or three similar options based on loan terms and annual percentage rate, or APR. Because APR includes all loan fees in addition to the interest rate, it’s the best way to understand the total cost of a business loan for the year.

In reality though, truly unsecured loans are very rare and only offered to a lender’s most creditworthy customers. Fortunately, there are several places to see what the credit bureaus are reporting. All the major credit bureaus offer you the ability to see your credit scores. Personal bureaus like Experian, TransUnion, and Equifax all make it possible to monitor your score, either for free or for a small fee. The major business credit reporting bureaus, Dun&Bradstreet, Experian, and Equifax offer the same service. With a Nav account, you can monitor both your business and personal credit in one place for FREE.

When You Should Apply For An Sba Loan

National Funding offers special opportunities for its customers to terminate contracts early and receive a discount in the process. Equipment Finance customers who pay off the total remaining balance early, at any point during the contract, will automatically receive a 6% discount off the total remaining balance. Working Capital customers who pay off the total remaining balance in full within the first 100 days of the contract will automatically receive a 7% discount off the total remaining balance. Customers must pay off the balance in full, be current, and in good standing to take advantage of the discount within the time parameters. In response to the coronavirus pandemic, small business owners are eligible to apply for an Economic Injury Disaster Loan Emergency Advance of up to $10,000. Purchase or lease the ovens and other restaurant equipment that keep your business cooking. Help your business grow with funds for equipment, transportation and overhead.

If you are able to clearly state your goals on paper and in person, it will be easier to explain exactly what you need to lenders. Identify what pieces of equipment you will need, the marketing strategy you will implement, or whatever else you will buy with this loan, and research the best price for each of these items. Show this research to the lender so they see that you are taking this seriously and you aren’t trying to take the easy route. Typically, small business lenders look for borrowers with a credit score that’s at least in the mid-600 range. Some lenders are more willing to work with low credit scores than others, though, so it’s important to shop around before giving up.

Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers. Even if one does, it may be wise to work with a loan officer in person anyway to give you a better chance to explain your business plan and address potential concerns. Whatever the method, be sure to have your documentation ready to upload, fax or hand to the loan officer.

applying for business loan

Next, after you’ve decided why you need a loan, you’ll need to determine how muchbusiness financing you need. Using a loan can help you finance expansion without draining working capital from the business. “The APR tells you the true cost per year of borrowing money; it takes into account your interest rate plus any additional fees and charges,” Martinez said.

Other alternatives to traditional lenders are online lending platforms, peer-to-peer lending sites, and your own network of friends and relatives. If you pursue this last option, Allec suggests working up an official, notarized agreement to avoid any misunderstandings or conflicts down the road between all the involved parties.