Small Business Loans: Compare Financing Options
There are many different types of small business loans. To help you find the right product for your company's needs, we created a list of the most common business financing options. You can learn more about each product by selecting an option below, or view our highest rated lender for each product if you already know the loan you are interested in.
Compare Small Business Loan Products
Small Business Loans FAQ
How Do You Qualify for a Small Business Loan?
The qualification requirements to get a small business loan depend on the lender, but lets take a look at some common criteria.
Most banks and credit unions will expect you to have excellent credit and will only lend to you if your credit is above 600 or 700. Online small business lenders are far more likely to lend to people who have personal credit scores that are below 600.
Many lenders have requirements around how long you have been in business with the lowest cutoff often being 2 years. This is a requirement for some because lenders are wary of lending to companies without a track record.
Some small business lenders have requirements about how much revenue your company earns annually. This amount will vary lender to lender.
Number of Employees
Some lenders prefer to lend to companies that have a certain number of employees.
Ask the Expert
In my experience with exhibitors and sponsors that provide typical business loans, there is a wide range of loans you can receive with differing requirements. Some lenders require a personal guarantee. This means that you personally are on the hook to pay back that loan in full. Others simply require bank references, financial statements (two to three years), and other documents.
Usually, lenders prefer to see businesses that have a track record of growth – preferably being in business for at least two years with financials to support. Further, business revenue will typically come into play depending on the size of the loan they are requesting, while the number of employees is typically just part of their operating costs, which is illustrated in the financials.
Be honest! Don’t fudge your numbers. Lenders are smart and see right through it. Be fiscally responsible. Apply for lending when you don’t need it. It’s always great to have in your back pocket if you ever need the funds for growth – the best time to apply for a loan is when you are doing well and don’t need the money!
How Do You Get a Small Business Loan?
To apply for a small business loan, you need to have your personal information and your business information on hand.
You may also need to provide:
- Personal and business bank statements
- Balance and income statements
- Personal and business tax returns
- Resume of your business experience
- Financial projections for your company
- Drivers license
- Business licenses
- Business plan
Traditional banks will oftentimes require you to fill out a written application, although some allow you to apply online.
When you apply with an online small business lender, the application is often shorter and easier to complete and they require less information and fewer documents. Documents can be scanned and uploaded online, allowing for potentially quicker approval processes.
How to Improve Your Chances of Approval?
There are a lot of things that you can do in order to improve your chances of getting approved for a small business loan.
Building your business credit is one way to improve your chances of approval. You can do this by taking out credit in your business’ name right after you start your business. While you’ll have to co-sign for a business credit card, having one will start the process of establishing your business credit history.
Create a Clear Business Plan
Another way to improve your chances of qualifying for small business loans is to have a clear business plan. Having all of your historic and projected financial information available to share with a potential lender can speed up the process. This makes you look professional and allows the lender to better understand your business’ needs and potential.
A good business plan can include:
- Description of your company
- Biographies of the management team
- Analysis of your industry
- Description of the service or product that you provide
- Plan for your operations
- Promotional and marketing strategy
- SWOT analysis
Compare Your Options
Make sure to compare small business loans. If a traditional bank or credit union turn you down, it doesn’t mean you can’t get approved somewhere else. While online small business lenders are great options, remember that you’ll have to pay a premium in the form of higher interest rates if you have bad credit or present increased risk.
Ask the Expert
A clear business plan certainly increases chances for approval. Lenders are not looking for certainty, but a well-thought out strategy is critical. Be real and drive home the current and future value of your business without seeming like you are naively presenting only the positive aspects of your business model.
Also, having taken out credit and paid that loan back is important. Having no debt is not necessarily the answer. Rather, having debt and showing a good ability to make those payments is critical to success as a small business owner and also to demonstrate creditworthiness to those looking to give a loan. It’s important to keep in mind that lenders WANT to lend money. They want to be involved with business growth, if not for the long-term relationship, but also for the interest and revenue from multiple accounts, etc.
Listen. As you grow in business, it is more important to listen to customer feedback and the market than to simply invest more in marketing to push what you think the customers want.
Also, work hard and show that to your team. When leadership is committed and hardworking, it makes all the difference. Finally, focus on ROI. Decide what is working and what is not, and the best way to do that is to have a good sense of your ROI on expenditures.