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Small Business Loan Applications: Your Questions Answered

5 min read • Oct 01, 2021 • Lendio

If statistics hold, just 34 percent of the nearly 32 million small businesses in the U.S. today will still be in business in 2031. And while there are a number of reasons why—business growth or inability to grow, unanticipated circumstances, inability to adapt or change with market demand, or even acquisition—one thing is certain: funding is always essential.

So why would a small business owner not apply for funding that could help them grow? Why wouldn’t a small business owner seek a line of credit to get through a market slowdown or other situation? We turned to two of our funding experts at Lendio—Tanner Cupello and Dave Gibbons—for answers, which they provided in our recent webinar, How to Prepare My Business for Finance.

Reasons that a small business owner may opt not to apply for outside funding include the myth of complex application processes, a lack of confidence in a personal credit score, or that it’s too late to make a difference. All of these reasons, said Tanner and Dave, are hurdles that can frequently be cleared by small business owners. 

Here are some of the other topics covered:

What’s the difference between a business loan and a personal loan?

Personal loans, like a home mortgage or an auto loan, are sometimes seen as “lower risk” to a lender because they’re based on collateral—in this case, the item that the loan will finance. If you default on a car loan, the vehicle can be repossessed and resold by the bank, which allows the lender to recoup the loan. Business funding, however, is often unsecured, although there are exceptions. Lenders base eligibility and terms of business loans on other factors, which can range from the type of business, number of years in business, cash flow, intended use of the funds, and other factors.

Why does an owner’s personal credit score matter in an application for small business funding?

Lenders often look at a business owner’s personal credit scores when making determinations about business funding because the way an applicant handles their personal finances may reflect their approach to business finances, too. This doesn’t mean applicants need to have perfect credit in order to apply for small business funding—there are products available to fit a variety of credit ranges and needs, although terms, including interest rate, can vary based on the credit score. It’s always worth applying to see what you may qualify for. Once the business itself builds credit, however, personal credit scores may be less of a consideration.

What’s the difference between completing an application online at Lendio vs. going to my bank? 

We consider Lendio a “marketplace” because we connect small business applicants to a variety of different funding opportunities through a single application. This allows our funding managers to create a better match between business and lender or business and funding options, whether the applicant is looking for a small business loan, line of credit, accounts receivable loan, term loan, bridge loan, or something else. 

Sometimes small business owners start the application process thinking that they want to apply for a specific type of loan, like an SBA loan, which is a fantastic product but may take more time or documentation than the applicant has. In a case like this, a marketplace funding manager might inform the business owner of other funding options, like an accounts receivable loan or equipment loan, that may actually be a better match. If an applicant goes straight to a bank that doesn’t fund these options, the business may never get the funding it actually needs. 

Lendio, for example, taps into more than 75 lenders during the application process, which means small business owners may be be able to access a variety of funding options. This is part of how we’ve been able to match solutions to more than 300,000 small businesses in the past 10 years for a total funding amount of more than $11.8 billion. Small business owners are encouraged to select the offer that best fits them, plus they have the benefit of working with a funding manager to walk them through the differences.

If I apply for funding for my small business online, why do I still need to talk to a funding manager on the phone?  

Personal conversations between a funding manager and a small business owner help uncover details about the business’s story. Lendio, for example, frequently calls applicants to get these additional details. Since a lot of business funding isn’t backed by collateral—they might be scored based on business plans, intent or purpose in applying for funding, personal credit, even the why the owner started the business—getting the applicant’s story can make matching the business owner to the right funding product easier and often helps the lender decide which applicants they want to fund, too.

I just want an SBA loan. Can Lendio help me?

SBA loans are one of the products Lendio can assist with, although before you decide on just one type of funding, it’s worth looking into all of the options available to you. Some of the options offered by Lendio’s funding partners can get a small business access to funds much faster—in a matter of days rather than months. Plus, Lendio’s single application will let you tap into a variety of options.

Watch the webinar for more detailed answers on these topics, too:

  • Business funding term options
  • When to apply for a small business funding, including SBA loans, term loans, or other funding options
  • Getting small business funding with a less-than-perfect credit score 
  • Information needed on your funding application
  • How long it takes to access funds once you’re approved

 

The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.

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