How to Apply for a Business Loan

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Do you need funding to fund your startup or expand your current business? There’s an abundance of loan options to choose from. But finding the right fit and applying for funding doesn’t have to be overwhelming. 

Here’s a step-by-step process to help you get started, navigate the loan process and secure the capital you need. 

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Find The Best Loan For Your Small Business

Lendio offers a free online service that helps business owners find the right small business loan options within minutes. With a network of over 75 lenders offering multiple loan products, Lendio’s marketplace is the center of small business lending.

How to Apply for a Business Loan in 5 Steps

1. Understand How Much You Want to Borrow and What For

You may be tempted to start applying the minute you spot a lender offering funding to businesses. But first, you want to establish why you need a business loan and how you intend to use the funds. The next step is to compute the estimated amount you need to accomplish your objectives. 

2. Find the Right Type of Business Loan

Once you’re clear on the desired loan amount, you can start researching loan options to find the best fit for your company. 

Business Term Loan

A business term loan is an installment loan product paid out in a lump sum. You’ll repay what you borrow in equal monthly payments if the loan is fixed. But the monthly payment amount may fluctuate if you get a variable rate loan. 

SBA Loans

SBA Loans are backed by the federal government and help small business owners secure the funding needed to keep operations running smoothly. Loans are not made by the US Small Business Administration (SBA) directly – you’ll have to work directly with a lender to apply for a loan. Still, borrowers must adhere to the rules and regulations set forth by the SBA that govern these loan products. 

Working Capital Loans

A working capital loan is a line of credit that lets you make withdrawals as needed. You’ll only pay interest on the amount you spend and get a set period to use the line before it’s closed and converted to a loan. The remaining balance is payable in monthly installments that include both principal and interest when the draw period ends. 

Equipment Financing Loans

Equipment financing loans can be used to cover most equipment purchases businesses need to operate. Some lenders don’t require down payments or collateral as the equipment can be used to secure the loan. 

Merchant Cash Advances

Businesses that hit a financial hump and need to secure funding to cover a short-term deficit could find merchant cash advances useful. The loan usually is repaid in daily installments (based on your credit card sales volume or total daily sales). 

Invoice Factoring

Invoice factoring or accounts receivable financing lets you get paid for outstanding invoices in a jiffy. You’ll get cash right away for a percentage of the invoice amount and repay the lender when the customer pays. Also, note that a fee applies for this service, often referred to as the factor rate. 

Lendio logo
5417fd6300006400057a59ecLoading TrustPilot
Find The Best Loan For Your Small Business

Lendio offers a free online service that helps business owners find the right small business loan options within minutes. With a network of over 75 lenders offering multiple loan products, Lendio’s marketplace is the center of small business lending.

3. Find and Compare Lenders Offering Business Loans

Traditional banks, credit unions and online lenders offer commercial lending products. You’ll want to shop around for financial entities that have the loan product(s) you’re seeking and feature terms and rates. While researching lenders, keep the following in mind: 

  • Online lenders generally have the most rapid loan processing times and offer funding to newly established companies. 
  • Banks and credit unions are most ideal for businesses with consistent revenues and adequate cash reserves that have been established for some time.

4. Prepare Documentation Required by the Lenders

You want to gather all the documents you’ll need before applying to speed up the review and underwriting process. That way, your application won’t be held up because the underwriter doesn’t have everything they need to make a final lending decision. 

The required documentation varies by loan product, but it helps to have the following on hand or you can read this article about the most common qualifications required for a small business loan.

  • Your company’s name and address
  • Your name, address and ownership percentage (Quick note: The lender will likely request that you provide the same information for your business partners). 
  • Your company’s Federal Employer Identification Number (FEIN)
  • Your company’s articles of incorporation any other legal documents 
  • Three to six months of banks statements for your company 
  • Profit and loss statements for the current year 
  • Balance sheet and cash flow statement for the current year
  • Tax returns for your company from the past two years 
  • A proposal detailing how you plan to use the loan proceeds (if applicable)

5. Submit Loan Applications to Lenders

Before deciding on a lender, reach out to learn more about their minimum qualification criteria. It’s equally important to ask about the documents you’ll need to submit your loan application. 

Once you’re ready, complete the loan application in its entirety. If you have questions while filling out the required forms, promptly reach out to the lender for clarification. That way, you’ll avoid unnecessary delays, errors and rejection from a simple misunderstanding. 

Depending on the lender, it could take anywhere from a day to a month to learn if you qualify. The lender will also notify you of the next steps in the process to get your loan closed and funded as quickly as possible. 

How to Apply for a Business Loan to Multiple Lenders at Once

Are you having trouble finding the right lender, or would prefer to explore options from multiple lenders at once? Look no further than Lendio, an online platform that helps small business owners get the funding they need. 

You can apply for a business loan for free and compare offers from over 75 reputable lenders in the Lendio network, like American Express, Chase, Kabbage and OnDeck. Even better, there’s no impact on your credit score to get pre-qualified for a business loan and explore potential matches.

To date, Lendio has facilitated over 300,000 loans, and this figure continues to rapidly increase. Get started by submitting the simple online form.

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