Do you have a small business and need a loan? This process can be complex and confusing. However, it doesn’t have to be. Getting the right small business loan often depends on your business and your needs. The rest is just organization and application.
Let’s break down the main topics that go into getting a small business loan.
Small business loans are a type of financing that you can get from different lenders for different purposes. Starting and running a small business takes a lot of money. A loan is a great way to keep your business afloat and to fund it. However, even with the help of loans, situations can be unpredictable. If you find that your small business is not receiving enough funds to operate, you can contact a bankruptcy lawyer. If you are in PA, you should call a Bryn Mawr bankruptcy lawyer.
Types of small business loans
With so many different types of businesses, there is a wide variety of loans that can be provided for your small business. When deciding which one is best for your business, focus on what you need a loan for and what type of business you are running. Below are just a few of the many small business loans you can apply for.
SBA loans are granted by the US Small Business Administration. This federal agency is designed to help you find the financing your small business needs, especially when you can’t get help elsewhere. This means that the SBA is not your lender. Instead, they guarantee a portion of your loans, which means if you can’t pay the loan back, they will do it for you.
There are three types of SBA loans.
7 (a) Loans
This loan is ideal for a wide variety of purposes, including financing working capital, expanding your business, and purchasing equipment. Lenders are typically banks, credit unions, and other specialist lenders. 7 (a) loans generally do not require collateral if the amount is less than $ 25,000. $ 350,000 up to the greater of $ 5 million will require collateral due to the higher risk.
This type of loan is more project-oriented and focuses on purchasing long-term fixed assets. This could include land or machinery. 504 loans usually require further consideration for approval and your business must have a net worth over $ 15 million and an average net income of $ 5 million or less to even be considered for the loan. Lenders are a combination of banks and Certified Development Corporations (CDCs).
This loan is best known for the speed of acquisition. If you meet all of the requirements, your request will be reviewed within 36 hours or less and you should receive your funds within one month. Express Loans can help you finance up to $ 350,000.
Short term loan
Much like SBA Express loans, short term loans are all about speed. However, these loans are significantly faster in the time it takes to receive your funds. If your request is approved, you could have your money back in just 24 hours.
It should be noted that the amount offered with a short term loan is lower than other types. Short-term loans do not exceed $ 500,000 and you will have to pay them back within a shorter time frame, usually 1 to 3 years.
If you are looking for a quick solution to your small business financial needs, a short term loan is your best option.
This type of loan will provide you with a single payment of money that you will have to repay on regular payment terms and at fixed interest rates. Term loans typically take around 1 to 5 years to pay off and are used to grow your business, purchase equipment, and hire staff, among other things.
If you are just starting out, it can be difficult to qualify for many small business loans. However, a start-up loan is a great way to get financing so that you can open up. Funds range from $ 500 to $ 750,000 and loan terms can last up to 25 years. While you don’t need to have any business experience, you will need a credit score of 680 or higher to qualify.
Start-up loans can help you rent office space, buy equipment, and hire staff.
How to apply for a small business loan
Obtaining a small business loan is not as easy as filling out a sheet of paper and sending it in. There are many factors that must be taken into account when making a request. Let’s break down each factor so that you have a better understanding of how to apply for a small business loan.
Is my business eligible?
Lenders look at many things when determining your eligibility. Make sure that not only does your business have good credit, but that you also have good personal credit. If your business has high cash flow and high income, you are more likely to be approved.
Other than a start-up loan, your eligibility will depend on your business history. At least two years of registration is essential to obtain a small business loan. Do you have a lot of debt accumulated from your business? This will significantly affect your eligibility for a loan.
If all of these factors come together, there is a good chance that you will be approved for the small business loan you need.
What documents do I need for a small business loan?
You will need seven different documents when you begin your loan application process. These include:
- Personal financial statement
- Borrower Information
- Statement of personal history
- Personal tax declarations
- ID card
- Business plan
How to choose a lender?
The best lenders are those with experience. You will want to find a bank with experience in small business loans. This will ensure that you are taken care of throughout the process rather than being unsure of your loan status.
Lenders also depend on the type of loan you are applying for. Be sure to research which lenders are attached to your specific loan.
When will I receive my small business loan?
Just like the type of lender, the length of time it takes to receive your funds depends on the type of loan you have applied for. Short-term and express loans are ideal if you need funds quickly. Other loans have more paperwork and will generally take longer. Some may take a few months or more.
Obtaining a small business loan can often seem confusing and overwhelming. However, if you stay organized with your business documents and lender research, the process should be fairly straightforward. There are many options for loans, lenders and the time it takes to receive them. Whatever your business needs, there is a small business loan that may be right for you.