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Business Loan Tips: Easiest Way to Get a Business Loan

Business Loan Tips

 

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Even with the best planning, every business owner knows that there may come a time when they have to seek business financing. According to the Federal Reserve Banks’ 2023 Small Business Credit Survey, only 17% of business owners felt that their businesses were in “very good” or “excellent” financial condition.

Whether you need to purchase new equipment, are in a cash flow crunch, or want to hire more talent, knowing the best way to get a small business loan is an important piece of that puzzle.

We’ve put together 4 indispensable tips for getting a business loan so that you can focus on what matters most: running your business.

How to fund your small business

When you find yourself in need of business financing, gathering small business financing advice can be invaluable. For starters, you should know that there are many different ways to get a business loan. Some of the most common are:

  • Traditional banks
  • Small Business Administration (SBA)
  • Online / alternative financing providers

Each of these sources also have various eligibility criteria to consider. Here are some small business funding tips that can help you on your research journey.

Eligibility criteria

Each of these sources will have differing requirements to get financing. Let’s start with traditional banks.

Traditional banks will typically require the following:

  • You must have good personal credit (690+) or excellent business credit
  • Your annual revenue should be at least $250K as well as be profitable
  • You must have been in business for at least 2 years
  • Assets would be helpful but not mandatory

While it is natural to turn to traditional banks for financing, your financial profile does needs to be buttoned up and it can take weeks or months to get approval and funds. Banks are not the easiest way to get a business loan, but they are certainly a great option for you if you meet their eligibility criteria.

The SBA offers three main types of loans: 7(a) loans, 504 loans, and microloans. Business owners apply for SBA loans through lenders who are a part of the SBA network—the SBA doesn’t lend money directly.

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While each participating lender may have slightly different requirements, you can expect the following for the 7(a) loan:

  • Be an operating business
  • Be in the U.S.
  • Be considered small under their size requirements
  • Can’t be an ineligible business
  • Be creditworthy and demonstrate a reasonable ability to repay the loan

In general, SBA loans have stringent requirements because their rates and terms are fairly competitive. To increase your chances of getting an SBA loan, our best SBA loan tip is to plan months in advance.

This is because it can take 30-90 days to just get an approval and then another 1-2 weeks for the funds to get to your account. While the SBA isn’t the easiest way to get a small business loan, it is still an attractive option for many business owners because of their competitive rates and terms.

Alternative financing providers are another option for business owners looking for funds. Their eligibility criteria are the most flexible and will generally require the following:

  • You must have been in business for at least 6 months
  • Your revenue for the last 3 months must average at least $15,000
  • Your FICO score needs to be at least 500
  • You must have a business bank account

When thinking about what is the best way to get a business loan or financing from alternative financing providers, a great place to start is making sure your business meets the above criteria.

These requirements are often minimal so as long as you meet these criteria, you should be able to get approved for business financing from alternative financing providers.

 

Want more details into small business loan requirements? Watch our video

Four business loan tips to keep in mind

While getting business financing is dependent on many factors, including the criteria mentioned above, we want to share four small business loan tips to make this process easier.

Tip #1 – Plan for financing long before you need it

Getting business financing can take some time. For example, traditional banks can take 1-2 business days to approve your financing request and then weeks for you to get your funds. With the SBA, that approval process can take anywhere from 30-90 days and then an additional 1-2 weeks for you to receive your funds.

To the best of your ability, plan for seasonal slowdowns or other slow periods so that you give yourself enough time to apply for financing from banks or from lenders participating in the SBA program.

However, if you find yourself in a time crunch and in need of funds fast, alternative financing providers are your best bet. Their approval times are as soon as 4 hours and funds can arrive in your account as fast as 24 hours.

Tip #2 – Know how much you want and know how much you can afford

You may get approved to borrow more than what you’re looking for. While it can be tempting to take the full amount, only do so if you have a concrete plan for using those funds. Otherwise, you could be putting your business into unnecessary financial strain.

Tip #3 – Have your business documents prepared beforehand

There’s no reason to prolong the business financing process. Be sure to have your business documents prepared in advance to reduce the back and forth involved in getting your funds.

Tip #4 – Don’t hesitate to ask questions

Getting financing is a significant decision. The financing provider you end up working with should feel like a partner to you.

This means, they should:

  • Be communicative, attentive, and answer you promptly
  • Never pressure you into making a decision
  • Treat you like a partner, not a sale

If you’re unsure about any aspect of the process, don’t hesitate to ask the financing provider your questions—that’s what they’re there for!

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Conclusion

Securing business financing can be pivotal for business owners, and understanding your options is key. From traditional banks to the SBA and alternative providers, each has distinct criteria and timelines. Planning ahead, knowing financial needs, preparing documents, and maintaining open communication are important ingredients to your success. We hope these 4 loan tips come in handy as you continue your financing journey.

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