How Do I Apply for a Small Business Loan?

apply for a business loan

It takes money to make money, as the saying goes, but you may be wondering which small business loan option is actually the best fit for your needs.

There are several different types of small business loan products to choose from and some may be a better fit for your business than others. So, the right loan really depends on your situation. You will find each loan product has its own set of qualifying criteria, payment schedules, risks and benefits.

Where you begin, according to aboutmoney.com, is with examining what each lender (banks, the Small Business Administration, credit unions and alternative lenders) has to offer, and of course, whether you can meet any specific requirements.

How Do I Apply for a Small Business Loan?

Start by looking at all the lenders and if what they offer will work for you. Think about your own requirements and if their terms are best for your needs.

Applying For Loans From Banks

Banks offer a traditional path in small business loans, but the path is not an easy one to take for most small business owners. According to bizfinance.com, banks have tightened their lending guidelines in a way that excludes many small businesses.

The Application Requirements Include:

  • An extensive credit history and an excellent credit score. Without these you may not meet the new stringent guidelines for a loan.
  • Collateral you can offer in case you cannot repay the loan.
  • An extremely detailed business plan outlining your past, present and future with this business, including what product or service your business offers, your target demographic, your competitors, and a marketing and sales plan.
  • You need to provide tax records, bank records and all financial records for you personally as well as the business.

This is not an ideal choice for you if:

  • Your credit is less than perfect.
  • You need a funding solution quickly. The lengthy application takes at least 30 days to process.
  • Your business is young and lacks a lengthy history of success.

Seeking a Small Business Administration Loan

The Small Business Administration (SBA), is a government agency created to help small business owners like yourself. It can be helpful for some, but once more you must be able to meet their qualifying guidelines.

The SBA offers several loan products; general purpose 7(a) and 504 loan programs, for special purposes and business needs. The loans cover start-up costs for a business, funding for expanding your business or cash flow to keep a business running smoothly. The SBA does not issue the funding, but rather connects the borrower up to one of their lending partners.

The Application Requirement Considerations Include:

  • Very good credit and collateral.
  • This is a good option if perhaps you are close to qualifying with a bank, and just barely missed approval.
  • Your credit history, managerial and business experience, your overall business plan and even your basic work skills can be scrutinized in the decision process for the loan.

This is not an ideal choice for you if:

  • You are in need of fast funding. Your loan will take more time to process because you are satisfying both the SBA and a lender. You may wait up to 90 days or more to get your loan.
  • You have had credit issues in the past: your history could prevent your approval.
  • You are lacking the skills that the SBA deems necessary to run your business. Your resume can count for, or against you.

Exploring Financing From Credit Unions

Credit unions are much like banks but are privately owned by their customers in a nonprofit status. They offer small business loan products comparable to a bank.

The Application Requirements:

  • Very similar to a bank application, credit unions will scrutinize your credit score, collateral and business plan. But, their guidelines may be slightly easier to meet.
  • You need to be or be willing to become, a member of the credit union. This means opening accounts with them and meeting their member qualifications.

This is not an ideal choice for you if:

  • Your credit is less than perfect.
  • You need a funding solution quickly. The lengthy application takes 30-60 days to process.
  • You lack a lengthy business history of success or a solid, well written business plan.

Financing Your Business With Alternative Lenders

Alternative lenders are the leading way most small businesses are funding their business dreams today. These agencies offer solutions that are a solid fit for almost any borrowing situation, whether you are a successful, established businesses or are young and expanding.

According to cnbc.com, franchise owners, who are struggling to secure business funding today are finding this to be the best avenue when applying for a small business loan. Alternative lenders give you several options to choose from, with a focus on ease in the qualification process, speed in getting you your money, and flexibility in the terms and repayment schedule.

The Application Requirements Include:

  • Filling out a straightforward, simple application, which can often be completed online.
  • Sending in a few bank statements to demonstrate the overall health of your business.

This is an ideal solution if you lack excellent credit and need someone to see your business potential. Alternative lenders offer small business loans with less stringent requirements and a faster application process. Some programs can get you money in hand within days.

This is not an ideal choice for you if:

  • You have excellent credit and run a very successful, well-established business.
  • You have valuable collateral to offer and don’t mind doing so to secure your loan.
  • You can deal easily with heavy amounts of financial documentation and lengthy details of your business plan.
  • You are not in a rush for approval or the funding, and you want the absolute lowest interest rate possible.

Choosing The Right Lender For Your Application

As a business owner, there are several small business funding options available to you. Depending on your needs and your unique situation, one small business loan option may be a better choice than another.

Take the time to research your options. Knowing how to apply for a small business loan is one of the first steps in the process. To learn more about creative business funding options and their specific requirements and benefits, contact Credibly today!

To pre-qualify now, submit our online request form. It’s free and easy and won’t hurt your credit.