Small Business Loans – Requirements You Need to Be Aware of
As a small business owner you may require a loan to cultivate business growth for your business to thrive and prosper. But, navigating yourself through the business loan process can be daunting and difficult. First you need to understand the requirements in obtaining a small business loan, then you need to find a solution that conforms to your needs.
Wise business owners explore the requirements and terms of the lending options available. And there are several different types of small business loan products to choose from. Depending on the lender, some may be a better choice for your business than others. Each loan product will have its own set of qualifying criteria, payment schedules, risks and benefits.
What is required?
The typical go-to lenders, according to aboutmoney.com, include banks, the Small Business Administration and credit unions, but the majority of small business owners are seeking alternative lenders to get the funding they need with more customized solutions.
Here is a look at the basic small business loan requirements with each lender:
According to bloomberg.com, banks look for excellent credit, extensive financial history and collateral. Essentially, if you are in a position where you do not need money, then you will qualify. Banks tightened their loan requirements after the credit crisis of 2008, and have not altered them much since. They focus their loan products on big business, which makes approval almost impossible for most small business owners.
Bank Loan Requirements:
- You need the flexibility of time. Loans can take 30-60 days to process.
- You typically need an excellent credit score and credit history to even be considered.
- 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.
- Proof of collateral, or valuable property, is required for them to take if you default on the loan.
Small Business Administration Loan
The Small Business Administration (SBA), is a government agency that can be helpful for some, but once more you must be able to meet their requirements and you should be prepared that the process will take even longer than with a bank.
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, 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.
SBA Loan Requirements:
- You will need good, solid credit and some collateral
- Time to process and give approval. You may wait up to 90 days or more to get your loan.
- Your resume, to look at your managerial and business experience
- The require a very detailed overall business plan that includes your past, present and future plans.
Credit unions are much like a bank but are privately owned by their customers in a nonprofit status. They offer small business loan products comparable to a bank.
Credit Union Loan Requirements:
- A good credit score, collateral and business plan is required, though the bar may be set a bit lower than most big banks
- That you become, a member of the credit union. This means opening accounts with them and meeting their member qualification
- Time to process your loan, usually 30-60 days.
Alternative lenders are the leading way most small business owners find a loan product that fits their needs today. Alternative lenders offer 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.
Alternative Lender Loan Requirements:
- That you fill out a page application, which can typically be done online.
- A couple of months of bank records.
- A few days to process the loan and get money in your hands.
When seeking funding for your business it is important to take the time to learn about the small business loan requirements from various lenders. There are several funding options available to you, but some are better suited to your needs than others. To learn more about creative business funding solutions, contact Credibly today!