To get a small business loan, follow these key steps:
1. Determine Your Loan Needs and Eligibility
- Assess how much funding you need and what type of loan suits your business goals.
- Check your personal and business credit scores; banks typically prefer scores of 690 or higher for the best rates, but online lenders and microloans may be options if your credit is lower
- Have at least a few years in business and a stable revenue stream for traditional bank loans, though SBA loans and microloans may be more accessible for newer businesses
2. Prepare Your Documentation
- Create a detailed business plan, including financial projections for the next five years, to show lenders how you will use and repay the loan
- Gather financial statements such as profit and loss statements, tax returns, and bank statements for both your business and personal finances
- Be ready to provide information about business ownership and collateral if required
3. Choose the Right Lender and Loan Type
- Consider traditional banks for larger loans ($10,000 to $5 million) but expect a stringent approval process
- Explore SBA-backed loans which offer favorable terms and are designed to help businesses that might not qualify for conventional loans. Use SBA’s Lender Match tool to find SBA-approved lenders
- Look into microloans (up to $50,000) for smaller funding needs, often available through nonprofit intermediaries
- Online lenders and credit unions may offer more flexible qualification criteria and faster application processes
4. Apply for the Loan
- Submit your application either online, by phone, or in person depending on the lender’s process
- Double-check your application for accuracy and completeness to avoid delays or rejection
- Consider seeking help from local Small Business Development Centers (SBDCs) or SCORE for application review and advice
5. Review and Accept the Loan Terms
- Once approved, carefully review the loan agreement including interest rates, repayment terms, fees, and any collateral or personal guarantees required
- Consult a business attorney if needed before signing
- After signing, funds are typically disbursed directly to your business bank account
Following these steps will increase your chances of securing a small business loan that fits your needs and financial situation. SBA loans are a good option if you face challenges qualifying for traditional bank loans due to their government-backed guarantees
