Did you know that nearly half of the American workforce is employed by small businesses? That’s a lot of people whose livelihood depends on the success and growth of the small business market in this country.
And for small businesses to thrive, just like most large businesses, there comes a time where getting a loan is the best option. Whether a business needs to finance a new property, expand operations, or get new equipment, a loan can mean the difference between growth or closing shop.
Are you a business owner wondering how to complete a small business loan application? It’s not too difficult, but there are a few things to be aware of ahead of time to get a small business loan.
Wondering how to qualify for a small business loan? Keep reading for the quick and easy tips you need to increase your chances of getting a small business loan.
Check to See If You’ll Qualify
Qualifying for a small business loan means having a good or great credit score. While you might qualify for a loan with an average credit score, you’re going to get the best rates with a score in the high 600s or 700s.
On top of your score, your length or business operation is important. It can be tricky getting a loan if you’ve been in business for less than two years. Most lenders would prefer a loan history over at least two years.
And of course, lenders are going to look at how much money you make each month to determine if you can make the monthly payments.
Choose the Right Loan Type
When it comes to small business loans, there are multiple types. SBA loans in particular are geared towards small businesses and backed by the federal government. This increases your chances of qualifying for a loan.
The most common is the SBA 7(a) loan which can be used for virtually any business expense. SBA microloans are smaller loans with a shorter payback time for businesses that need a quick cash flow boost. And 504 loans can be used for assets such as equipment or real estate.
Choose the Right Lender
There are many different types of lenders when it comes to financing small businesses. Some specialize in larger business or larger loan amounts, exceeding one million.
Others specialize in microloans, often less than $150,000. It’s important to find the right lender. Small business loan rates will vary greatly from lender to lender, so a comparison is key at this stage.
Wondering what the best banks for small business loans are? Click here to find out.
Gather Your Documents Ahead of Time
To complete your loan application, whether online, over the phone, or in person, you’ll need to gather your documents. This includes your business and personal tax returns for the last few years.
It also includes personal and business bank statements, your business financial statements, legal documents, and possibly your business plan.
Complete the Small Business Loan Application
Once you’ve chosen a lender and loan type and gathered your documents, it’s time to fill out the application itself. Now that you have the information in front of you, it shouldn’t take long to actually apply.
Depending on the loan type and amount of funding desired, the application might be longer than that of a smaller express loan. Online lenders make it easiest with an online application that can be completed at your own pace.
Expect to provide information about how you are going to use the loan funds, how you’ll pay them back, and if you have collateral to put up.
Getting Funded and Moving Forward
If you’ve evaluated your situation and determined you are likely to qualify for a loan, then completing the small business loan application shouldn’t be a problem.
The most time-consuming task is comparing and choosing lenders and gathering your documents. Once you do that, filling out the actual application is typically a breeze.
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