Editor's choice: Lendio business loans
- Network of over 300 lenders
- 10 types of financing available
- Positive reviews of customer service
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
Updated . What changed?
Getting a business loan can take a little more work the first time around. You need to make sure you’re applying for the right type of loan, have the credit score, income and cash flow to qualify.
These steps can help to set your small business up for success. But if you feel stuck, don’t be afraid to get professional help.
Business loans are designed to cover an expense that will create enough revenue to cover the cost of the loan. This is what lenders often call a self-liquidating asset.
For example, getting a loan to buy inventory or equipment is beneficial because it allows you to increase sales and — ideally — make a higher profit than you would have before.
A loan can be a risky choice for some startups because businesses have a high rate of failure in the first five years, according to the US Bureau of Labor Statistics.
Small business loans are also not a good idea if you’re in an unpredictable market or there isn’t enough demand for your product or services.
If you’re not sure if a loan is right for you, set up an appointment at a local small business nonprofit, like a small business development center (SBDC).
These often offer free, expert advice to first-time business owners and can outline all of your options. You can find a business center near you on the Small Business Administration (SBA) website.
Go into your comparison armed with specific details about the small business loan you need.
Writing or revising your business plan is a great way to analyze your business’s needs. Many lenders will ask to see a business plan, especially if you’re applying for a bank loan or SBA loan.
Before you decide on a type of loan or lender, see how well you meet these six typical business loan requirements.
Lenders want to see that you have the means to repay your loan. That’s why it’s more difficult to qualify for a business loan from a bank if you don’t have a credit score over 670, aren’t profitable, have low cash flow and are less than three years in business.
But first-time business owners with bad or no credit can still find financing. You don’t always need to meet such strict requirements to get a small business loan from online lenders or microlenders.
Use your needs and how well your business fits basic business loan requirements to help you choose the right type of small business loan.
Often, businesses start with microloans or online loans to help them get to the place where they can qualify for an SBA loan. SBA loans can help your business grow until it’s ready to qualify for a bank loan.
But you can skip these steps if you’ve relied on other types of financing during the startup phase, like investor funding. If you think you can qualify for a bank loan, consider a community bank. These are often more friendly to small businesses than large national banks.
Look at multiple lenders that offer the type of loan you’re looking for. Compare factors like the interest rate, fees, loan terms and how often they charge repayments.
One of the fastest ways to compare cost fo a small business loan is to look at the annual percentage rate (APR), which tells you the interest rates and fees you pay over one year.
Many lenders don’t offer this kind of information online — especially banks. Calling customer service is a great way to get an idea of the rates, fees and terms your business will qualify for.
If you’re applying for a bank loan, consider setting up a meeting with commercial loan officers at several banks in your area.
Get started on your search by comparing lenders that your business can qualify for.
Fill out a prequalification application with your top picks if your lender has an online application. This gives you a more personalized idea of the interest rate, loan amount and loan terms your business will get, though it’s not a guaranteed offer.
If you don’t have the option to prequalify, consider calling the lender and speaking to a representative — they can often give you a ballpark of rates and terms your business might qualify for.
After you’ve prequalified, your lender often lets you know what types of documents you’ll need to provide.
Often these include three years of business and personal tax returns, financial statements, bank statements, profit and loss statements and articles of incorporation. Personal financial documents are usually required for every owner with at least a 20% stake in the company.
If you’re backing your loan with collateral, you might need to get it professionally appraised. Your lender can often put you in touch with an appraisal service.
Follow the lender’s instructions to fill out the application. Many allow you to get started online, but often you’ll need to speak with a representative before you can fully complete it. You may also be required to visit a branch or hold a business bank account with the lender — which can further limit your loan options.
Double-check your answers to make sure there are no inconsistencies. Mistakes are one of the top reasons loan applications get rejected.
You can get a paycheck protection program (PPP) loan by applying through a bank, online lender or any other lender that has been approved by the SBA to offer PPP loans. But first, make sure you meet the requirements for a PPP loan. Generally, you must have fewer than 500 employees and be established before February 15, 2020.
You can also get an Economic Injury Disaster Loan (EIDL) by filling out an application directly on the SBA website.
Take the time to understand what you need — and what you can qualify for — when you need a first-time business loan. Get started by learning more about how the process works and comparing business loan providers.
Answers to more questions you might have about how to get a business loan.
You can get a business loan even if you don’t have the money to make a down payment. Often, get a business loan without a down payment by securing your loan with an asset other than the one you’re financing.
Consider putting up real estate or equipment down as collateral to make up for your lack of cash.
Since SBA loans are backed by the government, the steps it takes to apply are a little different. Learn about the application process by checking out our step-by-step guide to applying for an SBA loan.
You can get a small business loan with, though your options are often expensive. Check out lenders like OnDeck that use alternative data like your business’s shipping records instead of focusing on your credit score, revenue and time in business. Or read our article on business loan options for bad-credit owners.
Community banks sometimes offer business loans to startups and entrepreneurs that need seed money to get things up and running. Usually, startup bank loans are based on the business owner’s personal credit and assets.
If you don’t have the money to personally guarantee the loan or have bad credit you might not be able to qualify for a startup bank loan. But you could still get financing from a microlender.
Support your child’s financial knowledge and teach the important real-life money skills in a safe and controlled way with a kids’ debit card.
You can now calculate your payroll expenses based on gross income instead of net profit. Here’s how it works.
Reduce your debt by around 30% after fees — but only if you can stick with the program. Here’s how.
Don’t be fooled by false promises — here are red flags to watch out for and tips to find a legit company.
Compare options if you’re self-employed, a freelancer, a partner and more.
You can pay for car insurance in Bitcoin, even if your insurer doesn’t accept it yet.
Here’s where to get financial help for yourself and your business if you’ve been affected by the storm in February 2021.
Is Mercari the best secondhand app to buy or sell your goods? See Mercari pros and cons, reviews and complaints and general FAQs to decide.
Prepare to revamp your asset allocation and explore new investment classes.
The White House announced new changes to PPP loans, helping the smallest businesses and opening access to people with student loan defaults or nonfraudulent felony convictions.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.