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Whether you own a bakery, construction company, medical practice, or any other kind of small business, it’s important to know how to get a business loan. The first step is identifying how much money you’ll need. By ensuring you request the appropriate amount, you’ll save time and energy in the search for your loan.
The other crucial element is your timeline for receiving the money. If you need to have it fast, you probably should go with a streamlined financing option. When you have more time, you can also consider lenders like the Small Business Administration, which can take up to 3 months to deliver the money.
Once you’ve identified the amount and timeline, review the various options available to create a shortlist of contenders. You can use a small business loan calculator to see how much each loan would cost. These 4 popular pricing metrics will help you in this process:
Total Cost of Capital (TCC)
Annual Percentage Rate (APR)
Average Monthly Payment
Cents on the Dollar
Note that it’s nearly impossible to get an apples-to-apples comparison on loan products because different lenders use different metrics and treat their disclosures differently. Free comparison tools, such as SMART Box™ (Straightforward Metrics Around Rate and Total cost), can help level the playing field. Created by the Innovative Lending Platform Association, this resource can make it easier to get a clear idea of which loan product is best for your needs.
After you’ve identified a winner, it’s time to prepare for the loan application. Don’t rush this step, as lenders aren’t impressed by borrowers who can’t meet basic requests. If you fail to include required documents with your application, you could face immediate rejection.
Some of the documents you’ll want to have on hand include:
Personal background information
A solid business plan
Personal and business tax returns
Signed personal financial statements
Projected financial statements
Personal and business bank statements
The cost or value of possible collateral
Business licenses and registrations
Articles of incorporation
Contracts you have with third parties
After you’ve clicked submit on your application, the lender will review your documents and look into your financial and business history. The biggest question they want to answer is: If we approve this request, will they pay us back?
If your application is accepted, congratulations–you’ve acquired the capital you need to help achieve your business goals, and that’s something to be celebrated. If you’re rejected, don’t take it personally. The majority of loan requests are denied, so it will inevitably happen to just about every small business owner at one time or another.
What’s important is that you learn from the experience. Make a note of the things that went well in the process so you can leverage them in the future. Likewise, look for areas of improvement. With this approach, every loan application gets you closer to funding, regardless of whether it’s approved or denied.
Our goal is to help small business owners have all the tools and knowledge possible about loans. We’ve connected to hundreds of banks to keep you up to date with the best loan offers and options for your business!