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Here’s how to get a business loan in six simple steps.
We’ll start with a short questionnaire to better understand your unique business needs.
Once we discover your personalized matches, our team will consult with you on the process to follow.
1. Decide what type of loan you need to fund your business
|
Program |
Amount of the loan |
Objective |
|---|---|---|
|
Up to $5 million. |
Working capital, expansion and equipment purchases. |
|
|
Up to $500,000. |
Quick financing for working capital, expansion, and real estate and equipment purchases. |
|
|
Up to $5.5 million. |
Buy long-term fixed assets like land, machinery and facilities. |
|
|
Up to $50,000. |
Working capital, inventory, supplies, equipment and machinery. |
|
|
Up to $2 million. |
Repair material damage due to a declared claim and cover operating costs. |
|
|
SBA Community Advantage Loans |
Up to $250,000. |
normal business purposes; cannot be used for revolving credit. |
|
SBA Export Working Capital Loans |
Up to $5 million. |
Working capital to support export sales. |
|
SBA Export Express Loans |
Up to $500,000. |
Accelerated financing to promote the development of a company’s exports. |
|
SBA International Trade Loans |
Up to $5 million. |
Long-term financing to increase export sales or upgrade to meet foreign competitors. |
2. Determine if you qualify for a business loan
What is your credit rating?
Banks prefer to offer their low-rate business loans to borrowers with credit scores between good and excellent, or 690 and above.
How long have you been in the industry?
You must have been in business for at least one year to qualify for most online small business loans and at least two years to qualify for most bank loans.
Are you making enough money?
Many lenders require a minimum annual income, which can range from $50,000 to $250,000, for business loans and lines of credit.
3. Determine what payments you can afford
Take a close look at your business finances, especially cash flow, and assess how much you can afford to repay each month.
Your total income should be at least 1.25 times your total expenses, including your new reimbursement amount, says Suzanne Darden, finance specialist at the Alabama Small Business Development Center.
For example, let’s say your business income is $10,000 per month. That’s 1.25 times $8,000 in expenses. If you already pay $7,000 in rent, payroll taxes, and other fees, you should be able to afford a monthly payment of $1,000.
Some online lenders require daily or weekly repayments, so be sure to take this into account – you’ll need enough cash to make payments when they’re due.
Estimate the cost of a business loan
Calculate estimated payments, then see if you qualify for a business loan
Get personalized small business loan rates to compare
with Fundera by NerdWallet
4. Decide if and how you want to secure the loan
5. Compare Small Business Lenders
You’ll usually want to get the business loan that gives you the best terms. But other factors, like funding speed, may matter to your business, and different sources of funding may be better in some cases than others.
When to get a business loan from online lenders:
Online lenders typically offer small business loans and lines of credit of up to $500,000. The average annual percentage rate on these loans ranges from 6% to 99%, depending on the lender, the type and size of the loan, the length of the repayment term, the borrower’s credit history, and whether collateral is required.
These lenders rarely have APRs as low as those offered by traditional banks, but approval rates are higher and funding is faster than with banks – as fast as same day in some cases.
When to get a business loan from banks:
Getting financing from a bank tends to take longer than getting a loan from an online lender, but banks tend to offer the lowest APRs.
When to get a business loan from microlenders:
Moreover, the size of the loans is, by definition, “micro”. But these loans can work well for small businesses or startups that can’t qualify for traditional bank loans due to a limited operating history, poor personal credit, or lack of collateral.
6. Apply for a business loan
Start by looking at two or three similar options to compare their loan terms and annual percentage rate, or APR. Since the APR includes all loan fees in addition to the interest rate, it is the best way to understand the total cost of a business loan.
Of the loans you qualify for, choose the one with the lowest APR and the best terms for you – as long as you are able to manage regular loan payments – and gather your business loan application documents. These may include:
Note that credit reporting agencies do not differentiate between business and personal applications. If you use your personal credit history, your credit score could be affected when applying for a small business loan, which is why it’s important to do your best.
