How to get a small business loan

There are many that want to achieve the dream of owning their own business, and have long-term success. But, it’s never easy, especially when you need funding to make it happen and stay afloat. Millions of Americans rely on their small business for income, so to stay afloat, they may need funding to expand or bring balance to their finances. Whether you’re a seasoned small business owner, or looking to get a new business up and running, there are always options to get the money you need. Here’s how to get a small business loan, and the resources you need to ensure your new dream goes by smoothly.

Student loans: federal vs. private options

Owning a small business is no small feat. It requires a lot of determination to keep steadfast and keep it functioning well. And sometimes, that means finding more money to help grow or keep things balanced. So, you may be looking at a small business loan. These loans are offered to business owners to help them invest more capital into their venture, new or old. They can be used for different purposes within a business, but it’s all focused on helping business owners succeed in the near and far future. So, how do you get started?

Firstly, it’s important to know where to find these loan opportunities. And, you also need to figure out who you’ll choose as your loan source, as they can be offered by different institutions. SBA-backed loans are a popular option. These are offered by various lenders, which you can find using their lender match, and secured by the SBA itself for those that qualify. You can also find banks and credit unions that offer them. Make sure to view all your options before making a choice. If you have all your finances in order, and you’re well-prepared to state your case, you can get better chances of approval. Let’s go over the steps required to get a small business loan, and the additional tools you may need to gain a better understanding of your business prospects

What you need to apply for small business loan

Getting approved for a small business loan relies on different factors, which you should be aware of before proceeding. One of the first things to consider when looking at options for a small business loan is knowing why you need the loan. Whether you need funding to start a new business, want to manage cash flow, or purchasing a new property to help expand, you need to know what you want to do to better narrow down how much you need. Once you understand where the funds will go, then you can compare and contrast different lenders and rates to find what fits best for your finances.

But, what’s required when applying for a small business loan? Different lenders may have certain requirements you need to meet, but usually there are some things you need to prepare when you start the process. You need to gather as much information about your business to allow the lenders to calculate the risk of offering you a loan. So, the better a picture you can paint about your business, the better. Here are some of the things you may need to provide, but these can vary depending on the lender and your needs.

• Credit Score
• Revenue
• Cash Flow
• Collateral
• DTI Ratio
• Industry
• Age of Business
• Plans for the Loan

Your approval odds depend on how the lenders analyze any of these factors. For example, a relatively new business owner may rely more on their credit score than other items to get approved. So, if you’re starting a new business, it will help to get your personal finances in order. Make sure you understand these before you start. Often, if your business is brand-new, or less than two years old, you might find getting approved more difficult, as they expect some sort of cash flow. Gather as much information as possible and understand all of these factors as well as your business needs. Then, you’re sure to present a strong application.

If you want to know how healthy your credit score is so you can get a small business loan, use Credit.com’s Credit Report Card and see where you stand. Unlock your credit score and get recommendations on what to work on to improve.

Comparing banking options for your small business loan

When looking for a small business loan, it’s crucial to know that they’re offered by many institutions, but how they handle these requests could be different. Therefore, to increase your chances of getting approved, you must know the difference between lenders, provided you have a good understanding of your finances. So, let’s break down the options you have to give you a head start in finding the one that suits your needs.

Online lenders

For business owners that are just getting started and need quicker funding, online lenders are a good option. As with anything, there are pros and cons to getting a small business loan from an online lender. For one, applying online can be quicker and easier, and the same goes for your access to funds. Plus, doing it online means you can compare different lenders at the same time, and narrow down which one works best. And if you have a limited business or credit history, you may find greater chances of approval with an online lender.

Conversely, online loans have greater interest rates than banks or credit unions. Make sure you understand this before going through an online lender for your small business loan.

Traditional banks

Naturally, banks offer several financial products to choose from, which can make it easier to have one institution handle all your business needs. You can often find SBA-backed loans and other types of financial assistance. But, their approval requirements are more stringent than online lenders. To qualify, you likely need a good credit score, established business history, and any collateral you can provide. For newer businesses, bank loans may be harder to attain.

But, you may find lower interest rates and more term options with banks. The downside can be that your funds may take a while to get to you as they have a longer approval process.

Credit unions

Banks and credit unions have similarities, but when it comes to small business loans, there can be a few key differences. Credit unions, as not-for-profit, community-driven institutions, can offer even lower interest rates than banks. And, considering these unions are controlled by their members, you may find more flexibility in terms of loan terms, credit requirements, and other issues. So, as far loans go, credit unions can provide less of a hassle if you’re trying to find the right lender.

Credit cards for business

If you’re looking for another option to finance your business, a credit card might help. Business credit cards offer revolving credit and flexible payment options. Also, no collateral is needed, so you don’t put your business assets in jeopardy. Plus, some cards can have specific perks like cashback on certain business-related purchases, and bonuses just for signing up.

Much like personal credit cards, make sure you use these responsibly and make on-time payments, so your credit and business budget don’t take a hit. If you choose this route, look at different credit card lenders to analyze their rates, fees, and any other selling points that can inform your decision.

Starts your small business dream today

When it comes to financing your small business, you have options. Whether you go through revolving credit or a loan, it’s important to know how each works so you can find what works best for you. As long as you have a specific purpose for seeking funds for your small business, and your personal finances are in order, you’re sure to find the money your business needs, new or old. Compare these options and talk with a professional before proceeding, and start building your dream business today!