How to Get A Small Business Loan – Essential Steps

A business loan is a type of loan that provides the funds that you need to expand operations, purchase equipment and cover day-to-day expenses.

Small Business Loan

If you have never before applied for a business loan, you might be confused or reluctant about the requirements and some questions like where to begin. Here Cashably will discuss the process of evaluating your loan options and preparing your loan application. 

1. Consider Why You Need a Loan

Business loans vary from type to type. So doing thorough research on why you need a loan? Will help you choose the right kind of loan that perfectly fits your needs. Here are some examples of scenarios:

Buy New Equipment

Some lenders offer loans to buy equipment. These loans are designed to purchase equipment like machinery or furniture for businesses. This loan takes the equipment as collateral so the lender can keep the equipment if the business fails to repay the loan.

Borrow a Small Amount of Money

If you need a small amount of money you can go apply for a microloan. The U.S.-based Small Business Administration offers a microloan program that helps you lend money ranging from $500 to $50,000 for your business. Some non-profit organizations in the market offer microloans for businesses, such as Kiva etc.

Establish a Business

If you are just starting a business or trying to boost your startup growth, you may face some financial problems. Because most of the lenders require minimum time in the business as a requirement for the loan approval.

In such cases, you may consider applying for a microloan or a business credit card. You may find it easier to qualify for a business credit card as its approval depends upon your personal credit score.

2. Check Your Eligibility

The eligibility requirements for getting a loan vary from lender to lender. But here are some common things that most of lenders require when checking your application for loan approval:

Credit Score

The first thing that a lender requires to validate your application for loan approval is your personal or business credit score. This helps the lender to analyze the on-time repayment of the loan. In short, we can say that the higher the credit score, the more likely you are to get approval for a loan. 

Collateral

Some lenders may require something as collateral (something of great value, in most cases equipment or inventory). The lenders can keep your collateral in case you fail to repay your loan. Some lenders may also require someone’s personal guarantee, like pledging personal assets for loan approval.

Time in Business

Time in Business is the crucial thing in loan approval. Lenders necessarily consider the age or lifetime of your business. It can help them trust you whether you are committed to your business growth or success or not. The common time in business is one year. The businesses with age less than one year may face some problems but, they can also consider some alternate options to fulfill their financial needs.

Annual Revenue

The fourth factor that most of the lenders assess when approving your loan is the Annual Revenue of your business. The total number of sales you make per year is called annual revenue. 

But make sure to ask the lender for the requirements and review your business whether it fulfills the requirements or not.

3. Compare Different Loan Options

There are tens of places you can qualify for small business loan. Here are the three most common types of lenders.

Online Lenders

Online lenders offer a large variety of business loans to business owners. The common types that include online lenders are term loans, merchant cash advances and lines of credit. But the loan approval rates were lower than the traditional banks as per the survey of SBCS 2023. Online lenders usually have high interest rates as compared to traditional banks.

Traditional Banks

Traditional banks also provide the same type of loans as online lenders. The main advantage that traditional banks offer is low interest rates. On the other side, the main disadvantage is that it requires more documents and has more eligibility requirements.

Microlenders

Microlenders are usually non-profit organizations that help businesses grow by offering loans up to $50,000. These are typically designed for business owners who don’t qualify for traditional bank loans. These loans usually have easy and less stringent requirements.

4. Gather the required documents

Once you have considered the best loan option for you that matches your needs perfectly, start gathering the required documents. Here is the list of required documents that most of the lenders ask for.

• Personal & business tax returns
• Business licenses 
• Articles of incorporation
• Personal and business bank statements
• Profit and loss statements
• Financial statements
• Business plan
• Building lease

5. Submit Your Application

The final step to get qualified for a business loan is submitting your loan application. You can do it online or in person as per the requirements of your lender. Here is the list of common information that a lender may ask for to submit the loan application:

• Your Name
• Business Loan
• Social Security Number (SSN)
• Desired Loan amount
• Loan Purpose
• Business Tax ID
• Annual Revenue

Once you have submitted your loan application, you will have to wait for its approval. After the loan is approved, you have to sign an agreement before getting funds or a line of credit.

Wrap Up

Securing a business loan with Cashably is straightforward and essential for expanding operations or managing expenses. Whether you’re a first-time applicant or seeking specific loan types like equipment financing or startup capital, Cashably simplifies the process. Evaluate your needs, check eligibility based on factors such as credit score and business age, and compare loan options from online lenders to traditional banks.

Gather required documents like tax returns and financial statements, then submit your application online or in person. With Cashably’s guidance, navigating the complexities of securing a business loan becomes efficient and effective for achieving your business goals.