Updated
If you need extra cash flow or capital to expand your business, a business loan could be the ticket. But before you get started on the application process, compare a range of business loans to ensure you find the best loan for your needs.
Businesses can either be lent a lump-sum payment or a revolving line of credit, which is repaid, with interest, over an agreed term (generally anywhere from three months to five years).
Business loans come as either secured or unsecured loans and typically allow businesses to borrow anywhere from $5,000 to $500,000, though some lenders will allow you to borrow up to $1,000,000. Most business loans come with a fixed interest rate and you will need to make repayments on a daily, weekly or monthly basis.
SharpShooter Funding Business Loan
SharpShooter Funding Business Loan
Am I eligible for a business loan? What’s the best loan for my business? How do I compare business loans? How do business loan applications get approved? We take you through your business loan application to help you get it across the line.
You’ll usually need to have been operating for at least six months to one year for most unsecured business loans offered by online lenders and banks (although some online lenders will work with businesses that have been operating for a minimum of 100 days). If you’re looking for startup financing, you’ll need to turn to a lender specializing in it – or search for grants.
Your business will need to bring in a minimum amount of revenue each month or year in order to be eligible for a loan. Revenue requirements can range from as low as $5,000 a month to as high as $100,000 a year.
Most lenders will require that you meet a minimum personal credit score requirement in order to be eligible for a business loan. While many lenders will expect you to have a fair to good credit rating of around 650, some will work with borrowers that have scores as low as 450.
The best loan for your business will vary depending on a number of factors, such as:
Every business is different and will therefore have different needs and requirements. Luckily, nobody understands your business better than you do – all you need is to understand your options. That’s what we’re here for.
You can find details of the eligibility criteria involved with each loan product by reading the descriptions in the comparison table or by clicking the “read more” button. Checking whether you meet the minimum eligibility criteria before you apply is the first step in your comparison process. This will help you to narrow down choices that are the most suitable for you. If you do not meet the minimum eligibility criteria for a loan, do not apply for that loan.
If you know what loan you need, the next step is deciding what your business can afford. Look at your incomings and outgoings to see what you could comfortably repay without putting too much strain on the business. If it’s a loan for a start-up, you’ll need to rely on cash flow projections.
Once you’ve determined what you can afford to borrow, you should compare the rate and any fees or charges for a variety of business loans to find the one that represents the best value for your business.
Lenders offer repayment terms of varying flexibility. Some will allow you to repay daily, others weekly and some will require you to repay your loan monthly. Work out which will best meet your business’s needs in terms of your cash flow.
Lenders use a variety of criteria to see if you fit their risk profile and ensure your business can repay the loan.
Start-up financing is usually harder to find and be approved for, so if your business is established, you will find it easier to get a loan. The business turnover is also considered and lenders usually have a minimum requirement for monthly or annual turnover. They may also use your turnover to determine what the business can afford to repay.
The lender will assess the company directors’ personal credit scores as part of the application process, and if the business is established, the lender may also check the business’s credit score. Assessing credit scores allows lenders to determine how risky your business is to lend to.
If you receive credit card payments in your business, lenders may use the volume of these payments to judge your ability to repay the loan. The assumption among some new lenders is that you will use this volume to repay the loan.
Similar to credit card volume, lenders may factor your accounts receivable value into their asset ratios to help them make a decision.
Lenders will check what company structure you have and how long you have been in the existing structure. If you have recently undertaken a restructure or are applying for financing in the middle of restructuring, lenders may not want to finance you at this time.
Does your business have an existing debt with another lender? This will be considered as part of your application.
For various business loans, including for example a revolving line of credit, your business will usually need to be profitable to be approved.
There are a number of mistakes that applicants make when applying for a business loan, from choosing the wrong loan option to submitting an incomplete application.
In terms of the type of loan, it’s always a good idea to try to think realistically about what would best suit the business in terms of financing volume, flexibility and repayments.
When it comes to submitting the documents, you should always understand what you’ll need to provide to the lender before beginning your application. Omitting or forgetting to submit vital information or documents may lead to an application being delayed or rejected altogether.
There are a number of reasons why a lender may reject a business loan application. It’s important to ask for feedback from your lender if they do reject your application. This feedback will give you insight into what you did wrong, which you can improve on for the next time you apply. If the lender is unable to provide this feedback, you may want to review your application and see if you can spot any red flags yourself.
The lender will specify which credit history they will need to check, but generally, the lender will want to verify the company directors’ personal credit histories. Your business’s financials may also be checked using accounting information that you supply as part of the application process.
Compare a range of financing types below.
You have a set limit and can use up to that limit when you need it. Repayments are flexible as long as you keep the account in good standing.
You can get funds that you are required to pay over a set term, which is usually between one and five years.
This works just like a personal credit card except it’s for business expenses, and you can add multiple additional cardholders.
If you have outstanding invoices and you need them to be paid, you can sell them to an invoice financing company and receive what you’re owed minus a fee.
This is a secured loan available for businesses of all sizes with leases also being available.
There are various options available to let you purchase or lease equipment.
The Canada Small Business Financing Program (CSBFP) offers loans up to $1,000,000 that are 75% backed by the government. To apply, you’ll need to head to your bank, credit union or financial institution.
Business overdrafts are attached to your business banking account and allow you to overdraw up to a specified limit on that account. You only pay interest on your outstanding balance.
This type of financing allows you to fund the purchase of goods from domestic or international suppliers.
