How to Get a Small Business Loan: Complete Guide


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Obtaining a small business loan is often a critical step when starting and scaling a business. After all, financing provides business owners with the capital they need to launch their business, maintain cash flows during tough times, or expand their operation. However, obtaining funding as a small business can be a complicated procedure, if you don’t prepare. Simply by understanding the application process, having the right documentation available, and researching the best loan options available to your business, you can make obtaining a small business loan a much easier task.

1. Determine How Much Capital You Need

When approaching a small business lender, every business owner should have a strong idea of not only how much money they need, but exactly what they plan to use the capital for. Having a defined business plan throughout the loan process will ensure that you avoid borrowing more than you actually need and paying interest on undeployed capital, or borrowing too little to complete your growth initiative and worsening your business’s debt.

Similarly, to ensure that your business will use the funds responsibly, most lenders will want to see a defined plan for how you plan to use their capital. Whether it be for business expansion, marketing initiatives, inventory financing, or stabilizing cash flows during seasonal fluctuations, you’re more likely to be approved for a loan if you present potential lenders with specific needs and a targeted plan for the future.

Why Get a Small Business Loan?

Before applying for a loan or financing it’s necessary to consider the purpose for obtaining additional capital. Without a plan in place, you may squander your chance at growth or stability. Having a clear understanding of how the financing will help you achieve your business goals can ensure that the money is well invested. By mapping out exactly how you plan to use the funds, you should arrive at an understanding of exactly how much financing you need.

If you plan to use the capital to expand your business, tally up all of the associated costs plus any additional liquidity you may need to support your growth initiative to find a suitable number. If you are looking to stabilize cash flows during the slow season, spend some time projecting future revenue and current cash shortages to ensure that you apply for the right sum. By focusing on how the money will be used, you should be able to pinpoint the most helpful amount of funding for your business, which will ensure that you maximize its impact.

2. Evaluate Your Small Business’s Financial History

Before approaching a small business lender, spend some time researching the variety of loans and financing options that are available to your business. To determine which loans and financing your business qualifies for, you’ll first need to evaluate the financial history of your business as well as a number of other factors such as your credit history, length of time in business, and monthly cash flows.

Credit Score

One of the first factors that small business lenders will examine in your financial history is your credit score. Your personal credit score is presented as a number between 300-850, and it reflects your “creditworthiness” in the eyes of lenders. Your personal credit history, a compilation of your existing account statements, total levels of debt, payment history, and many other factors, is crucial in determining their creditworthiness, credit score, and ability to meet the financial obligations of a loan. The more favorable your credit history, the likelier you are to return a business lender’s investment in your company. However, it is still possible, through a number of ways, to secure loans with bad credit.

Length of Time in Business

Another factor to consider when applying for small business loans is your length of time in business. Many lenders require that you have a certain minimum amount of experience in business before you can obtain a loan, and most debt financing options are not available to those just starting their business. With a short operating history, it is difficult for investors to predict your business’s probability of repaying their loan, as your expected revenues and typical cash flow are not yet defined. Most lenders tend to require 6+ months in business before issuing loans, and many reserve their most attractive offers for those with a stable history of operation.

Cash Flow

In addition to your business’s operating history, lenders will be particularly interested in your typical cash flow and monthly revenue. Lenders will want to see a consistent cash flow and steadily performing monthly revenues in order to determine if your business will have the necessary cash on hand to meet its financial obligations.

3. Compare Different Types of Small Business Loans and Financing

Based on all the above information, your business needs and financial history, your small business will have a variety of loan and financing options to choose from. Some are easier to qualify for than others, some have longer repayment schedules with lower interest rates, and others have more flexible approval amounts and repayment structures. To make the most of a loan or other financing solution, it’s important to pursue the funding options that best suit your business needs at the moment.

Unsecured Term Loans

If you are a small business owner with a strong credit rating, favorable credit history, and healthy business, an unsecured term loan may be your best option. Unsecured term loans are issued by lenders that are confident in a business’s ability to complete monthly payments. Because they do not require that you “secure” your loan with collateral, unsecured term loans often come with higher interest rates, and are issued to the healthiest operations. For example, an established restaurant owner seeking loans for working capital in order to continue paying their wait staff throughout the pandemic may apply for an unsecured term loan.

Merchant Cash Advance

For small business owners with a weaker credit history, or those with fluctuating revenues that seek short-to-mid term financial support, a merchant cash advance is an ideal financing option. Unlike term loans, remittances on cash advances are determined by future revenues. Rather than paying back a fixed sum each day, week, or month, your business returns a set percentage of credit and debit card revenues each month, ensuring that you are not stuck paying more than you can afford each month.

SBA Loans

If your small business is in need of longer-term financing and assistance, SBA loans are a strong option. Contrary to what the name suggests, SBA loans are not actually issued by the Small Business Administration. These loans are offered by private lenders and are partially secured by the SBA. In order to incentivize lenders to offer favorable financing to small businesses in particular, the SBA secures these loans with the requirement that long repayment terms, lower monthly payments, and capped interest rates are offered to business owners. These factors make SBA loans a great choice for small businesses in need of long term financing, however, they are considerably more difficult to secure as a business owner, and are not a reliable source of funding if your needs are immediate, as SBA loans may take months to approve.

Line of Credit

A line of credit can be a fantastic solution for business owners who are tight on working capital, need to stabilize cash flows, or could benefit from access to emergency funds. Unlike a term loan, which is issued with specific payment terms and monthly payments, a business line of credit offers borrowers a maximum credit limit which they can draw from as needed., For example, a line of credit with a maximum draw of $250,000 permits a borrower to withdraw funds as needed until that limit is met, with interest paid only on the amount of capital that is used. Once the borrowed amount is repaid, you typically regain access to draw from the full $250,000.

Access to a line of credit would allow your business to stay adaptable to necessary changes in payroll, necessary increases in working capital, or split-second business opportunities through flexible withdrawal options.

Secured Loans

Secured loans, which require that borrowers pledge some sort of collateral (“security”) to a lender in the case of default, are a suitable choice for small business owners with savings or assets, who seek lower interest rates or larger loan amounts than would be available through unsecured loans. 

Common examples of secured loans come in the form of equipment financing, as physical machinery is provided to businesses with the guarantee of payback over the equipment’s lifetime. If the borrower is unable to keep up with payments, the lender receives ownership of the machinery used as collateral. Invoice factoring, wherein business owners sell unfulfilled invoices to a lending firm in exchange for upfront funding is also a form of secured financing. When the invoices are paid by customers, the lending firm takes a fee and returns the remaining sum to the business. 

Secured loans serve the long term growth of your operation, and often come with more favorable terms for borrowers than alternative arrangements as pledging collateral reduces the lender’s risk.

Business Credit Cards

Business credit cards, like consumer credit cards, are available to small business owners that seek access to a revolving line of credit to meet their company’s short term capital needs. Owners, and employees with access to the business card, may use credit to make purchases and withdraw cash at a moment’s notice. Just like consumer credit cards, your business card will require payments on a monthly basis, with the penalty of interest payments for each deadline missed. For this reason, business credit cards are not necessarily a long-term financing option for small businesses, but a means of extending the spending abilities of the business on a day-to-day basis

4. Find the Best Small Business Lender

Before you apply for a loan, it is important to select not only the right loan options but also the right lender. Each lender has different strengths and weaknesses, any of which may affect the ability of your business to stay afloat. Each lender has its own method for measuring risk and underwriting your financing, and each has its own policies regarding approval and payment windows. Your best fit depends on how urgent your needs are, what type of financing you need, and how your business stacks up to a lender’s criteria.

Traditional Banks

Traditional Banks are most favorable for small business owners with established businesses, positive credit history, and the ability to secure their loans. If you meet these requirements and are willing to wait a month or longer to access your funds, the lower interest rates and monthly payments offered by many traditional banks may serve your business well.

What are the Bank Requirements for a Small Business Loan?

Generally, small business loans require the following:
  • You need the flexibility of time. Loans can take 30-60 days to process.
  • You typically need an excellent credit score and healthy balance sheet.
  • You need to have been in business for at least three years and have documentation to prove your financial stability.
  • The bank requires an extremely detailed business plan. They want to know everything about your business, marketing plan, and your tax and bank records. The process is rigorous.
  • You need proof of collateral, or valuable property, is required for them to take if you default on the loan.

SBA (Small Business Administration)

The Small Business Administration does not actually finance loans, however, their guaranteed SBA loans offer low interest rates and longer repayment periods for approved borrowers. SBA loans can be a great way to secure long term financing at a low interest rate, but their strict requirements and long approval process make securing an SBA Loan a months-long process, so SBA Loans may be a difficult option for borrowers in immediate need.

SBA Loan Requirements

Broadly speaking, SBA loans require:

  • Good, solid credit and some collateral
  • Time to process and get approval. You may need to wait up to 90 days or more to get your loan.
  • Your resume, to look at your managerial and business experience
  • A very detailed overall business plan that includes your past, present and future plans.

Online Lenders

If your business is in need of funding ASAP, a traditional bank may not do the job. Instead, looking to online lenders, which often provide a larger variety of financing options and a shorter approval process than standard banks, may allow you to find the right financing for your business and to access that financing at a quick turnaround rate of a few days.

5. Gather Required Documents

Once you’ve determined which loans you hope to pursue, and through which lenders, you should prepare some vital documents to present to your loan officer. While each lender will ask for different materials, it’s likely that you’ll need to present some combination of the following: 

  1. Personal and business-related tax returns
  2. Personal and business-related bank statements
  3. Business-related financial documents, including a cash flow statement
  4. A business plan

6. Submit a Small Business Loan Application

Once your materials have been collected and your desired lender has been decided on, you’ll need to connect with a loan officer and formally submit your application for a small business loan. For more information on how to select the right loan for your business, and how to connect with loan officers dedicated to your application, visit here.

How to Apply For Small Business Loan

Before applying to any lender, you should look at the criteria set by the institution and determine if you stand a chance of qualifying.

According to, it is very difficult for a small business owner to meet the guidelines set by banks and credit unions today, which demand excellent credit, extensive financial history, and collateral.

What You Need to Apply to a Bank or Credit Union:

  • You typically need an excellent credit score and credit history to even be considered.
  • The bank or credit union will ask for an extremely detailed business plan.
  • They will want to see everything about your business documented (your competitors, recent growth, projected revenues) and a well-written, detailed marketing plan.
  • You will need to turn over copies of your tax and bank records.
  • Personal finance records may be required.
  • You should have proof of your collateral ready for review.

Disadvantages to Applying Through a Bank or Credit Union:

  • This is not a quick solution. Bank and credit union small business loans can take 30-60 days to process.
  • You may go through most of the time-consuming process and later be denied. This is common.
  • If you have had credit challenges in your business, lack credit history, or do not have valuable collateral to offer up, these are probably not the best choice in loan options.

Applying for a Small Business Administration Loan

The Small Business Administration (SBA), is a government agency created to help small business owners like yourself.

The SBA offers several loan products; general-purpose 7(a) and 504 loan programs, for special purposes and business needs. The SBA does not issue the funding, but rather connects the borrower up to one of their lending partners.

  • They require everything the banks and credit unions do, often in more detail, but maybe more flexible with credit score requirements.

Disadvantages of Applying For SBA Loans:

  • 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.
  • Your managerial and business experience, your overall business plan and even your basic work skills can be scrutinized in the decision process for the loan.

How to Apply for a Small Business Loan with Alternative Lenders

Alternative lenders are the leading way most small business owners find a loan product that fits their needs today.

They can provide several funding options including small business loans, with a focus on ease in the qualification process, speed in getting you your money, and flexibility in the terms and repayment schedule.

  • Simply fill out a basic application online.
  • Provide a couple of months of your bank statements to show the health of your business.
  • The approval process will only take a few days for you to receive an answer.

There are several small business loan options available to you and it is important to find the one that offers you the right terms, ease of application, approval process, and time to funding.

To learn more about creative business funding choices and how to apply for a business loan, contact Credibly today!

To get started, complete our online pre-qualification request form.

How To Get Approved for a Small Business Loan Quickly & Easily

There are a variety of steps to take to ensure your application is approved quickly and easily. Here are the primary things to take into account.

1. Your Credit Score

Depending on the loan option, a good credit score, often 650 or higher, will be necessary in approving the loan. If you have yet to build credit or struggle with poor credit, there are still financing options available to you. However, the higher the credit score, the more likely you are to be approved quickly and easily.

For those with poor credit, focus on bolstering your business plan as much as possible, as well as providing evidence of strong business finances, as this will help compensate for lacking credit.

2. Your Stage of Business

One of your primary considerations should be the stage of business you are currently in. There are fewer loan options available to new businesses and first-time entrepreneurs than there are for established small businesses. For new businesses, venture capital investors, crowdfunding, and government-backed loans are the most accessible forms of funding.

Established businesses have more options available to them, and provided you are in good financial standing, you can likely qualify for a low-interest commercial bank loan and unsecured credit line.

3. Your Business Plan

Prior to applying for a loan, it’s important to fine-tune your business plan and be prepared to present it to lenders. Lenders want to see a meticulously thought out business proposal that details the exact plan for implementation, accurate projected returns, and an action plan for creating those returns in an allotted timeline.

The more compelling your business plan is, the more likely you are to be approved by lenders.

4. Your Business Finances or Personal Finances

For established businesses, providing evidence of your monthly finances will be essential. This includes submitting all tax documents for the last two years and providing proof of your monthly earnings. While business finances won’t solely determine your eligibility for a loan, they will help to determine the quantity of the loan, as most lending agencies provide loans in conjunction with a business’s average profit margin.

For brand new entrepreneurs who lack business finances, providing evidence of your personal finances can help facilitate the approval process. Showing that you are hardworking, in good financial standing, have no outstanding debts, and have a proven track record of fiscal responsibility will significantly enhance your potential of qualifying for a loan.

5. Your Ability to Provide Collateral

Especially for new businesses or those with poor credit, providing some form of collateral is essential to secure the loan. Collateral varies among agencies, but many require you to secure the entirety of the loan, which can be challenging when applying for startup funds. Offering your car, house, or business as collateral for the loan will enable you to get approved much more easily.

Applying for a loan can seem intimidating at first. With all of the requirements that go into securing the loan, many worry their applications will be rejected. To make the process easier, ensure you have everything planned out prior to applying, and carefully review the application requirements of the agency in advance.

You will likely be asked to provide your credit score, business and personal finances, tax documents, and collateral in order to be eligible for a loan. Access the capital you need to thrive in the marketplace. To learn more about how to get approved for a small business loan and other modern business funding solutions, contact Credibly.

Plan for the future with Credibly.

We recognize the unique financial needs of your business. Although we don’t provide mezzanine financing, we’re equipped to help you assess if this is the right path for you.

Our commitment is to understand your business’s potential beyond just the numbers. We’re here to offer insights and guidance—not just financing.
If you’re considering your next financial move and wondering if mezzanine financing fits your growth strategy, let’s discuss your options.

With experience supporting over 30,000 businesses, we’re prepared to help you make an informed decision.

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