Financing

Blogs.Financing

Register

6 Step Guide- How to Get a Business Loan

Comment Count:
27

Comments welcome on this page. See Rules of Conduct.

6 Step Guide- How to Get a Business Loan

By ngoriel, SBA Official
Published: September 4, 2013 Updated: September 4, 2013

Money is the lifeline of any business, so whether you’re starting a business or running an existing one, securing financing is a major factor, especially for small businesses.  Many budding entrepreneurs find the task daunting and don’t even know where to begin.

Here’s a simple yet practical guide on how to go about preparing to apply for a small business loan.

1.    What criteria do banks look for in making small business loans?

Different banks or lending institutions may have different standards, but in general, in order to consider your application for a small business loan, banks will require:

  • The loan must be for a sound business purpose. For SBA-guaranteed loans, the business must be eligible based on size, use of loan proceeds and the nature of the business (no lending, speculating, passive investment, pyramid sales, gambling, etc.)
  • You and your partner(s) are of good character, have experience and good personal and/or business credit history
  • Ability to pay back the loan- reasonable to strong collateral (personal and business assets) is very important. SBA expects the loan to be fully secured, but we will not decline a request to guaranty a loan if the only unfavorable factor is insufficient collateral. And of course, owners must have personal equity investment in the business/skin in the game.

2.    What information will you need?

Different lenders may require more or fewer documents, but in general, you will need:

  • Personal and business credit history
  • Personal and business financial statements for existing and startup businesses and as well as a projected financial statements
  • Strong, detailed business plan (including personal information such as bios, education, etc.)
  • Cash flow projections for at least a year, and
  • Personal guaranties from all principal owners of the business

3.    How can you set yourself up from the beginning to make the process easier? (i.e. accounting systems, etc.)

Be prepared; be thorough; be truthful.

  • Choose your lending institution carefully. Larger banks tend to shy away from small loans as they are less profitable and take the same amount of underwriting and servicing. That doesn’t mean large banks do not make small loans; it is just more difficult.
  • Approach banks or lending institutions you have worked with or are a customer of
  • Explore community banks and Credit Unions
  • Talk to a lending officer and find out exactly what documentation they require
  • Be thorough, bring everything they ask. Many loan applications are denied or face unnecessary hurdles because of incomplete applications.

Even before you start gathering and organizing the information required by lenders to consider your application, you should educate yourself regarding business loans so you can understand and discuss intelligently with the lending officers when the time comes.

4.    What is the typical size of a small business loan?

Small businesses come in many sizes, from a start-up of a one-person company to hundreds of employees, and their financial needs vary accordingly, so “typical” also varies. That said, in the banking industry the median small business loan is about $130,000 - $140,000 with highest around $250,000. SBA small business loans range from about $5,000 (microloans) to $5 million (largest guaranteed) with the average loan around $371,000.

5.    How can you get financing to start a business since many banks want to fund growth?

Start-ups are probably the most difficult ventures when it comes to securing financing. Many start-up businesses seek financing from family, friends and credit cards.  If the credit is sound, the business plan strong and you have enough personal resources to invest and collateral to guarantee, smaller, community banks and  other community financial institutions and Credit Unions may consider lending you money.

Your best bet by far is SBA assistance. Begin by visiting SBA's website , where you will find a wealth of information not only on how to secure a small business loan but equally importantly, other services and training opportunities to help you succeed.

6.    Are there associations that can help?

SBA works closely with a large network of partners that leverage SBA resources and are just one phone call away and ready to provide extensive help.

  • SBA District/Branch Offices– at least one in every state
  • SCORE– (approximately 300 chapters nationwide)
  • SBDCs – Small Business Development Centers; (approximately 900 locations nationwide; associated with higher education institutions (colleges and universities)
  • WBCs- Women’s Business Centers (approximately 100 educational centers nationwide)

About the Author:

ngoriel
Natale Goriel

SBA Official

Hi, my name is Natale and I'm serving as a Moderator for the SBA Community. Our goal is to continually improve this site to meet your needs, so we appreciate your feedback and participation.

Comments:

Good day Are you in need of financial help or need loan to settle your debt and you need a loan for your business or to solve other monetary issues, contact us via email with the information listed below: ( williamfinanceagency011@gmail.com ) OR ( williamfinanceagency0011@gmail.com ) APPLICANT LOAN INFORMATION Names in full: Address: Gender: Occupation: Email: Phone Number: Amount Required: Loan Duration: Country: NOTE: Interested applicant should submit his/her request to the above email for immediate processing. In acknowledgment to these details, we will send you a well calculated Terms and Condition for the amount you require. Sincerely,
We give real answers real solutions to your financial problem. Are you rejected by your bank, or you need a quick fast loan to meet up your financial needs of loan to settle your bills, debt and establish your business. Apply for loan now. We give out loan with low interest rate of 2% per annual. If you are interested contact Via: williamfinanceagency011@gmail.com OR williamfinanceagency0011@gmail.com and fill the below loan application form. LOAN APPLICATION FORM: Full Name: Country: Address: Phone Number: Loan amount: Loan Duration: Occupation: Monthly Income: Gender: Age: Contact Email: williamfinanceagency011@gmail.com or williamfinanceagency0011@gmail.com Thanks Mr William.
We give real answers real solutions to your financial problem. Are you rejected by your bank, or you need a quick fast loan to meet up your financial needs of loan to settle your bills, debt and establish your business. Apply for loan now. We give out loan with low interest rate of 2% per annual. If you are interested contact Via: williamfinanceagency011@gmail.com OR williamfinanceagency0011@gmail.com and fill the below loan application form. LOAN APPLICATION FORM: Full Name: Country: Address: Phone Number: Loan amount: Loan Duration: Occupation: Monthly Income: Gender: Age: Contact Email: williamfinanceagency011@gmail.com or williamfinanceagency0011@gmail.com Thanks Mr William
Good informative article for the people those are looking for loans, small business owners those are in downfall or planning to start a new one, loan program is very support to let them stand up with market competition as well as growth. for easy loan approve, business credit line or any commercial lending information visit, moneyman4business
Do you need a loan here is an opportunity for those in financial problem and those who want financial uplift in their life, we give out loan at a very reasonable interest rate of 2%, we give out all kind of loan to help the nation from financial stress. Many are suffering and needs help to improve their life status, many are jobless and need financial help to start a business, many needs financial help to clear their bills and debt. Here is a wise decision for you now. Our loan offer is unsecured loan which means there is no collateral involved. As a loan seeker you are eligible to apply for loan. Lender Name:Franklin Moore Email:instantloanfirm@outlook.com Best Regards, Jimmy Johnson.
Hello, I am a new for this program and would be interesting in the program, but I still have no clue what to starts. Is there any way I can directly call for a consult with?
SCORE is a great resource for new business owners. They can match you to a mentor that will help you apply for funding with organizations best suited to your business type, size and age.
Start before the loan is needed. It is critical to build a relationship with the people at the lender before the business actually needs the loan. Decide what the money is needed for. There are good and bad reasons for business loans. Good reasons include financing a piece of equipment, real estate, long term software development or large seasonal sales variances. Decide how much money the company needs. Most small businesses don’t ask for a large enough loan. Underestimating the amount of money can lead to problems with a lack of working capital sooner than planned. Overestimating can make lenders question the business owner’s assumptions and credibility.
In many cases, using some type of asset as a form of collateral may be the best method available. Collateral can often mean anything of great value that isn’t likely to depreciate quickly. Prime examples include real estate, equipment, inventory for your business, etc.
Business owners should know that their business is capable of having a credit score of its own. This business credit score can help in securing new equipment, additional inventory, etc. Business loans aren't the only option.

Pages

Leave a Comment

You must be logged in to leave comments. If you already have an SBA.gov account, Log In to leave your comment.

New users, Register for a new account and join the conversation today!