How to Get a Small Business Loan [Step-by-Step Guide]
Read a step-by-step guide on how to get a small business loan.
Updated on March 25th, 2022
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Taking out a business loan could be the best way for you to start or expand your small business. Loans give you quick access to the capital that you need to purchase equipment and property or hire new employees. Below, you'll find a step-by-step guide on how to get a small business loan.
How to Get a Small Business Loan:
1. Determine how much money you need and why you need it.
Before you even contact a small business lender and apply for a loan, you need to figure out exactly what your business needs money for and what amount will meet that need. There is nothing wrong with taking a loan, but if you can finance a new venture without it, then don't be too quick to accept something that you will have to pay back. Having said that, if you know that your business absolutely needs the money to move forward, work out exactly how much money you need. It will help to have a number for the bank or financial institution when you meet with them, and a reason for your loan application.
2. Consult with a bank or business lender.
Meet with a bank or another lender that specializes in small business loans. Meeting with a lender will help you to understand what your options are and what the best interest rate is. If you meet with several lenders, you may be able to find the best interest rate to save your business money.
The lender will probably have some questions for you regarding the nature of your business and the purpose of the loan. Your answer will help them to find the best solution for you, but they will also help the loan officer to assess your ability to pay back the loan.
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3. Provide all of your information to qualify.
Each lender may have different requirements, but during your application process, you may have to provide information about your revenue, credit history, and collateral that you can put up against the loan. These details will all be listed in your loan application.
4. Agree to the terms of the loan.
If your application is approved, you need to formally agree to take the loan and accept the terms of the lender. The terms include the percentage of interest that will be charged, the amount of the loan, the repayment schedule, etc.
5. Put the loan to work right away.
Once you have secured your loan, it is important that you start putting the money to work immediately. Remember, eventually, you will have to pay the loan back, so the sooner you can invest the money to start making more money, the better.
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FAQs:
How can I get a business loan with no money?
Unsecured startup loans are a good way for new businesses to get funding if they don't have collateral or a down payment, or don't use a cosigner. These loans are for new business owners with a good credit history and rating. Check Kabbage's unsecured startup loan options.
What credit score do you need to get a small business loan?
This varies from lender to lender. Typically you would need a credit score of 640+ for a bank loan or a Small Business Administration (SBA) loan.
But for loan eligibility, the higher your credit score, the better.
How do I get a loan to start a small business?
Can I get a small business loan with a 700 credit score?
A credit score over 700 is considered good by all lenders, and can help you to qualify for a business loan with favorable terms.
Do I need good credit to get a small business loan?
Yes. If you have a bad credit score you may struggle with your loan approval. However, you will find that some lenders provide small business loans for bad credit situations.
What is the best small business loan?
How can I get a small business loan without collateral?
Unsecured loans, which are loans without collateral, are available from many lenders. An SBA loan is an example of an unsecured loan. Unsecured loans typically come with higher interest rates and tighter repayment requirements.
What is the best way to get a small business loan?
Start by speaking with a loan officer and learning what your options are if you are getting a loan to start a business or to develop your existing business.
How do I apply for a small business loan?
A business bank loan typically requires you to fill out a detailed application form and submit supporting documents that demonstrate the financial stability of your company. Getting a business loan is not the same everywhere.
How can I get a small business loan?
Submit an application to your financial institution and provide supporting documents, like a credit report, company financial records, and sometimes details about collateral that you can put up against the loan.