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Where Can You Apply For a Small Business Loan?

Written by Banks Editorial Team

Updated May 23, 2023​

3 min. read​

There are many options where to apply for a small business loan. From banks and more traditional lenders to online marketplaces that allow you access multiple choices with one single application, you can determine the right option for you to succeed with your small business.

When you run a small business, there are times when you need to borrow money. A small business loan can help you expand a product line, launch a marketing campaign, or help with cash flow emergencies. There are many types of funding available, and it’s up to you to find the one that best fits your needs.

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What Is a Small Business Loan?

A small business loan is a funding product that provides money for a company that is classed as a small business. The funds from a small business loan can be used to start a business, expand a company, purchase an existing one, or provide cash to meet expenses or expansion goals. Some small business loans are short-term, while others are long-term.

Types of Small Business Loans

When you need a small business loan, there are many options out there. You need to find the one that best suits your unique circumstances. Here are a few of the most common types of small business loans:

  • Traditional bank loan
  • Short-term loan
  • Long-term loan
  • Merchant cash advance
  • Private investor
  • A business line of credit
  • Small Business Administration (SBA) loans
  • Startup loan
  • Accounts Receivable loan

With so many options available, you need to research each one to determine which one is the best fit for your company. Various factors determine if your company can qualify for a specific loan type, so you may need to consider when choosing your loan product.

Eligibility To Apply For A Small Business Loan

Anytime a bank or other type of lender loans you money, they need to know that you can pay it back and that you’re likely to pay it back. For this reason, there are specific eligibility requirements for loans. In some cases, the eligibility requirements depend on the type of loan.

For example, an accounts receivable loan eligibility leans heavily towards your company’s daily sales and not on your business credit rating.

Of course, there are general eligibility requirements for most loans. If you’re afraid you don’t meet the criteria, you can always pursue an alternative method of financing.

  1. Personal Credit Score: If you have been in business for more than two years, the lender looks at your credit score instead of the company’s. Most traditional lenders want you to have a credit score of 680 or higher. Some startup loans might ask for a credit score of 720 or better. Of course, if you have several years of experience with startup companies, you might be able to find a loan with a lower credit score. If you or your business have made mistakes in the past with your credit, there are alternative sources for funding that don’t rely on your credit rating as much as they do your daily sales receipts. These types of loans look at your daily sales, and in some cases, don’t even run a credit check.
  2. Years in Business: Most traditional lenders would like to see that you’ve been in business for at least two years. However, if you’ve opened or successfully run other startup businesses, you might be able to get a bank to provide a loan. Even with alternative loan types, those companies want to see that you’ve been running the business for a minimum of six months. When you pursue an alternate form of funding, you’ll need to divulge your daily receipts to qualify. You must make sure that you can pay back any loans that you take out.
  3. Annual Revenue: When you apply for a traditional loan, the bank or other lender wants to know that you can afford to repay it. They look at your debt-to-income ratio. This is an easy formula. You need to divide the amount of money you make each month by the debt payments you need to make. If your ratio is high, it makes it less likely that you’ll qualify for a traditional loan. Your annual revenue qualification is linked to the amount of money you want to borrow and the lender type. You should expect to have a yearly revenue (before you deduct expenses) of at least $200,000. If you’re looking for a large loan, it might need to be higher.
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Things to Consider Before You Apply For A Small Business Loan

Before choosing a lender, there are some things that you need to consider. While you might be tempted to select the first offer, you need to pause and consider the following items:

  • Can you afford the monthly payments without creating a lot of stress on your cash flow?
  • What is the interest rate of the loan?
  • What is the length of the loan?
  • What is the method of repayment? (i.e., automatic deductions, deduction from your credit card sales, payments to the lender)
  • Is it the best offer?

You need to make the best financial decisions possible for your small business. It isn’t a good idea to borrow money that you can’t quickly repay or pay a higher interest rate to borrow more.

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