There are many reasons why small businesses may need to take out loans, including to:
No matter how important your reasons might be for requesting a small business loan, banks won’t simply give you the money – especially if your venture is a startup. Equally important, you don’t want to immediately commit to the first loan that comes your way. Instead, do some research to help ensure you receive the best possible rates and repayment terms.
Below are some of the main steps for getting small business loans.
There is a wide variety of small business loans, allowing you to pick and choose the most appropriate financing options for your goals. Below are some of the more popular types of small business loans:
A few lesser-known types of small business loans include:
Most lenders will want to review your company’s credit history before approving any loans. Take the time to clean up any potential blemishes on your record – including missed payments or outstanding balances.
If you’re just starting out, you may not have a business credit score yet. However, you can still demonstrate:
When sourcing small business loans, banks are an obvious choice, whether you choose to work with:
There are also aggregator sites, such as LendingTree and Fundera, which can help you easily connect with direct online lenders.
Every lender uses different approval processes. Large commercial banks typically ask for the most documentation, and credit card companies ask for the least. Either way, it’s a good idea to organize all of your supportive documentation, including:
You also need a clear picture of the loan amount and how that money will be used.
Once you have a list of potential candidates, apply to as many lenders as possible. Doing so helps minimize the chances of being declined – and maximizes your chances of receiving the best possible offer.
What “best” means varies from business to business. In most cases, you want the largest amount with the least strings attached, and you want to receive that money as quickly as possible.
The above steps outline the traditional loan process under normal circumstances. With the coronavirus pandemic, some lenders may be stricter with their lending requirements and approvals. With many small businesses struggling and needing financial support, this also minimizes the pool of available financing.
However, there are lending programs that have been developed specifically to help businesses during the pandemic. The SBA’s Economic Injury Disaster Loan (EIDL) program, for example, provides small businesses with low-interest loans of up to $500,000. You may be able to find similar programs simply by doing a Google search of “COVID small business loans.” Just make sure any lenders you work with are licensed and credentialed.
Getting small business loans isn’t always easy. Still, it is often necessary to save or expand your existing operations – making the research, prep, and approval processes worth the time and effort.
If you’d like to learn more about the Clover Capital merchant cash advance program, contact a Clover Business Consultant today.
This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.
1 “Small Business Term Loans: Where to Find Options,” Nerdwallet, 19 March 2021
2 “Equipment Financing,” Businessloans.com, 4 May 2021