Need a loan to keep your business operating or to get it off the ground? You’re not alone—about 43% of small businesses are in the same boat.
Before you apply for a small business loan, you’ll need to figure out how much you need. This isn’t as easy as it sounds, especially if you’re running a start-up. In some cases, you won’t be able to give a solid answer before preparing your financial statements.
Once you know what you’re looking for, it’s time to focus on the loan itself. Here’s how to apply for a small business loan in four simple steps.
Determine What You Qualify For
There are a couple of key factors that influence your ability to get a business loan. For starters, your credit score should be above 680, and ideally over 700. You can get your report at no cost from any major credit bureau.
Lenders will also take a look at how long your business has been around. If you’ve been in business for at least two years, you’ll qualify for most bank loans. On top of that, many lenders require you to have annual revenue of $50,000 to $250,000.
Consider Your Options
The type of loan you should get depends on what you intend to do with the money. If you want to manage your daily expenses, your best bet may be to opt for a business line of credit. This acts as a safety net, allowing you to tap into financing when needed.
If you’re looking to grow your business, look into SBA and traditional term loans. These come with higher borrowing maximums, such as $5.5 million for SBA loans. Some lenders also offer loans for equipment and other products that fit a growing business’s needs.
Compare the Lenders
The two main sources of small business loans are online lenders and banks. If your business is still new or you need money quickly, online lenders are a fine choice. Their APRs are rarely as low as those offered by banks, but approval rates are much higher.
If you have good credit and you don’t need funding fast, consider traditional bank options. You can also apply for SBA loans, which are widely regarded as the best loan product on the market. For more info on SBA small business loans, check out SBALenders.com.
Gather the Documents
Before applying for your loan, make sure that your documentation is in order. By preparing these files now, you’ll be able to streamline the loan process. Depending on the lender, you should submit some combination of the following:
- Business plan
- Financial statements
- Personal and business tax returns
- Personal and business bank statements
- Relevant legal documents (franchise agreement, commercial lease, etc.)
More on How to Apply for a Small Business Loan
Once you’ve picked your preferred type of loan and lender, you’re good to go! Check the loans you qualify for, pick the one with the lowest APR, and apply for it. APR includes the interest rate and all fees, making it easy to calculate the total cost of the loan. Want to know more about how to apply for a small business loan? Trying to raise your credit score as soon as possible? Keep reading our Finance section!
