how to obtain a small business loan

To obtain a small business loan in 2025, follow these key steps:

1. Determine Your Loan Needs and Type
   • Decide the loan amount and purpose (equipment, expansion, working capital).
   • Consider different types of loans such as SBA 7(a) loans, SBA Express loans, microloans, online business lines of credit, or traditional bank loans.
2. Check Your Credit Score and Financial Health
   • Most lenders prefer a personal credit score of 580 or higher; traditional banks usually require 680+.
   • SBA loans generally require credit scores around 640+, with microloans accepting lower scores.
   • Online lenders may accept scores as low as 500.
   • Have solid financial documents ready including tax returns, profit and loss statements, bank statements, and cash flow projections.
3. Prepare Your Documentation
   • Business information: business name, address, EIN.
   • Financial statements: tax returns (2-3 years), monthly profit and loss, bank statements.
   • Details of business owners: names, SSNs, addresses for those owning more than 20-25%.
   • Collateral information if required.
   • Business plan with realistic financial projections.
   • Any licenses, permits, leases, and contracts relevant to the business.
4. Apply for the Loan
   • Choose where to apply: banks, SBA-approved lenders, online lenders, credit unions, or nonprofit organizations.
   • Applications can be online, in person, or via phone depending on the lender.
   • Use platforms like Mercury for quick access to business loans or apply directly with multiple lenders for comparison.
5. Review Terms and Accept Loan
   • Upon approval, review the loan agreement carefully, including interest rates, repayment terms, fees, and any personal guarantees.
   • Ask questions or have an attorney review it if needed.
   • Sign the agreement and receive funding, usually transferred directly to your business account.

Additional Tips:

• SBA 7(a) loans have lower interest rates (starting around 11.5%) and longer terms but require more documentation and longer approval times (60-90 days).
• SBA Express loans approve faster (within 36 hours) for loans up to $500,000 but at slightly higher rates.
• Microloans up to $50,000 are easier for startups with mentorship included.
• Online business lines of credit give quick access but tend to have higher rates (15-25%).
• Some loans do not require collateral but may need personal guarantees.

Being well-prepared with complete documentation and a strong business plan increases your chances of approval and getting favorable terms.