5 Steps to Your Next Small Business Loan
When you need capital to grow your business, update your equipment, or resolve cash flow issues, you need a small business loan. But going through the loan process can be an intimidating process. The pressure to get your loan approved can be high when you’ve got a small business to run and money is tight.
Fortunately, with all the loan products on the market nowadays, any small business owner can get a needed business loan, whether from a traditional lender or an alternative one. You need to carefully choose which loan product you’re going to go for and make sure you’re eligible before you start the application process. Choose a lender you want to work with, collect your financial paperwork, and file your loan application. Follow these steps to make your next small business loan happen.
Choose a Loan Product
There are so many different types of small business loans that just deciding which one to apply for can be overwhelming. The Small Business Administration (SBA) runs several loan programs through traditional lenders and nonprofits. Most people go for a 7(a) loan, which can be used for any business purpose from starting a new business to providing working capital, leasing or buying tools and machinery, renovating your building, buying a new building, and more. If you specifically want to buy real estate, you can go for a CDC/504 loan. If you need a small amount of money, you can go for a microloan. If you need to recover from a disaster, you can choose a disaster relief loan.
But SBA loans aren’t the only options. You can get a conventional small business loan from a bank, for example. Bank loans are cheaper interest-wise than business credit cards, and they’re generally approved faster than SBA loans. Of course, you can also go for an alternative loan from an online lender. These products include merchant cash advance loans, invoice factoring loans, and working capital loans.
Make Sure You’re Eligible for a Loan
In order to qualify for a small business loan, you’re going to need a high personal credit score and strong business credit, too. If you want to apply for an SBA loan, you have to make sure you’re not in default on any other government-backed loans (like student loans), that your business qualifies as a small business under SBA guidelines, and that you’re not operating in an ineligible industry, like real estate, gambling, or religion.
Choose a Lender
The lender you choose for your small business loan will depend somewhat on what you’re using the money for, how fast you need it, and what your credit score and business finances look like. If you have lower credit and can afford to wait for a lengthy application process, consider an SBA-backed loan. If you have great credit and have time to wait, a conventional bank loan could be your best choice in terms of interest and repayment schedule. If you have poor credit or you need money immediately, you can choose one of the many alternative lenders offering small business loans.
Get Your Paperwork in Order
Business loan applications require a lot of paperwork. You’ll need to create a business plan and a business loan proposal. These documents should lay out your business goals and your plan for reaching them, as well as your specific plans for how you’ll use the loan money to grow your business. You’ll need to provide financial paperwork for your business, including annual revenues and projections, balance sheets, and income statements. You’ll also need to show your articles of incorporation, business license, client list, commercial leases, driver’s license and resume.
File Your Loan Application
Applying for traditional and SBA-backed loans will require meeting with a loan officer in a bank or a nonprofit. You can try to expedite your loan application approval by providing all of the necessary paperwork at once when you submit your application, but the lender may come back during underwriting to ask for more information.
If you work with an alternative lender, you can submit your loan application online. While you’ll still need to submit all or most of the same information and paperwork that you would submit to a traditional lender, doing so online streamlines the process. Most online lenders can approve your application right away so you can get money within a matter of days.
When your business needs a cash infusion, it’s time for a small business loan. Work with the right lender to get the loan you need for your business, so you can continue providing the products and services your customers crave.
