To apply for a small business loan, follow these key steps:
1. Determine Your Loan Needs and Eligibility
- Decide what type of loan you need based on your business goals and funding requirements.
- Check your credit score, as lenders often require a good credit score (typically 690 or above for banks) to qualify for the best rates. If your credit is lower, consider alternative lenders or microloans
- Understand the lender types available: banks, credit unions, SBA lenders, online lenders, and nonprofit organizations
2. Gather Required Documentation
Prepare the following materials, as lenders typically require:
- Basic business information: name, address, employer identification number (EIN).
- Financial statements: profit and loss statements, balance sheets, tax returns, and bank statements for both the business and owners.
- Details about business owners: names, Social Security numbers, and ownership percentages.
- Collateral information if required (e.g., real estate, equipment) and its valuation.
- Personal guarantee agreement, which makes you personally responsible if the business defaults
3. Apply for the Loan
- Choose your lender and apply either online, by phone, or in person depending on the lender’s process. Some banks and credit unions require in-person or phone applications, while many online lenders allow fully digital applications
- Consider having a business advisor or Small Business Development Center professional review your application to ensure completeness and accuracy
4. Review Loan Agreement and Receive Funds
- If approved, carefully review the loan agreement including terms, interest rates, repayment schedule, and fees.
- Ask questions or seek legal advice if needed before signing.
- After signing, the lender will disburse funds, often directly to your business bank account
Additional Tips
- Having a solid business plan, expense sheet, and financial projections improves your chances of approval
- If traditional loans are difficult to obtain, SBA-guaranteed loans reduce lender risk and may be easier to get
- Some lenders, like PayPal, offer fast online applications with quick funding for eligible businesses
- Build relationships with local banks or credit unions, as they may offer more flexible terms if you have an existing relationship
By preparing thoroughly and choosing the right lender, you can successfully apply for a small business loan to support your business growth
