How To Apply For A Business Loan


When you decide to start a business, you should be prepared to invest not just your time and energy but also money/capital, as, without this, your business will only remain a plan in your head.  In some cases, individuals willing to invest all that is required financially but do not have enough capital might have to resolve to get a business loan. 

WHAT IS A BUSINESS LOAN?

A business loan refers to any loan for business motives. Whether to acquire an existing business, start up a new business or upgrade your current business, any loan you acquire for business reasons Is a business loan.

It might interest you to know that there are various business loans you can pick from if you are looking to get one. Discussed below are six popular types of business loans you might consider. 

Read: 10 Effective Steps To Get A Business Loan

1. Term loan

A term loan as Its name implies is a type of loan given to a person to be related over a period of time. There are two types of term loans I.e short term or long-term. 


CHARACTERISTICS OF TERM LOANS

  • It is very suitable for businesses looking to expand that also have good credit and a healthy business and who don’t want to wait extensively for funding.
  • You can get capital upfront to finance your company.
  • Your loan term is generally between one to five years. With a business term loan, you get a predetermined amount of money and a fixed interest rate to be repaid in a set number of years depending on various factors. 
  • It is majorly used for buying equipment or minor repairs and renovations as it’s generally within the span of $25,000 to $500,000, with interest rates from 7% to 30%.
  • Age Criteria: Minimum age of the applicant should be 18 years at the time of loan application and the maximum should be 65 years at the time of loan maturity.

STEPS TO APPLY FOR A TERM LOAN

Term loans are majorly gotten from banks or financial institutions and so you can get the proper information from banks or institutions you would like to apply at. 

The second option is to visit business loan websites like lendio.com etc and review and compare accessible choices or information pertaining to loan deals offered by banks and NBFCs.

If the applicant finds a loan that is fulfilling all their business requirements, he/she can submit the necessary details for further loan processes to be conducted by banks or financial institutions. 

Further steps will then be communicated.

2. SBA loans


Another means to get a business loan is through SBA loans. The SBA does not directly lend you money but rather backs and supports the organization granting you the loan.

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SBA sets approaches for loans made by its partnering lenders and micro-lending institutions and also provides assurances and safety standards for lenders especially banks who, in turn, can lend money to fund acquisitions.

The SBA does not directly lend money to business owners.

Normally, businesses must meet SBA size standards, be able to repay, and have a sound business purpose. Even those with bad credit may qualify for startup funding.

The lender will provide you with a full list of eligibility requirements for your loan. 

CHARACTERISTICS

  • An SBA loan can be used to buy fixed assets for instance equipment, paying existing debt, business acquisition financing, etc.
  • Eligibility for an SBA loan is dependent on a business’s source of income does to the qualities and history of its ownership, and the area where the business operates.
  • Their requirements are not usually as stringent as other business loan mediums.

Read: HOW TO APPLY FOR A SMALL BUSINESS LOAN IN 10 EASY STEPS

STEPS TO APPLY FOR AN SBA LOAN

Every one of the SBA programs has specific eligibility criteria and an application process. Visit the SBA website i.e. www.sba.gov  for information on how to apply for an SBA loan and for indexes to ensure you have everything you need for a successful loan application.

On the website, you can also find a state-by-state list. 

3. BUSINESS LINE OF CREDIT


This business loan is a great opportunity for small businesses to grow. It is a revolving loan that affords you the opportunity to a fixed amount of capital, which can be accessed when needed to meet short-term business needs.

There are two classes of a business line of credit i.e secured and unsecured line of business.

CHARACTERISTICS

  • A business line of credit Loans offers a soft cushion in times of financial emergencies.
  • It’s a flexible financing option.
  • The secured business line of credit requires collateral which the unsecured line of credit does not require any collateral.
  • At a minimum, you’ll need at least six months in business and $25,000 in annual revenue to qualify for a business line of credit.


STEPS TO APPLY FOR A BUSINESS LINE OF CREDIT LOAN

A business line of credit can be gotten from either a bank or an online lender. Just like in other bank-related avenues, a strong revenue, good history( between one or more years) as well as several documents are important determinants of your chances of getting a business line of credit loan.

Some of the documents to be requested are personal and business tax returns, bank account information, and business financial statements, such as profit-and-loss statements and a balance sheet. 

Online lenders generally have fewer restrictions and qualifications than banks, but they tend to charge higher interest rates and have lower credit limits.

4. EQUIPMENT FINANCING


This financing method involves getting finance/loan to get equipment for a business. One good aspect of this loan system is that the equipment itself acts as the collateral, so you may not need to secure the loan with anything else.

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However, note that equipment financing only works in cases where you need a loan to cover the costs related to buying new equipment or equipment from the existing owner.

This loan does not cover purchasing a new business.

CHARACTERISTICS

  • There are two notable options for equipment financing, i.e. obtaining a loan to purchase equipment or leasing equipment. If you feel that the cost of equipment will be too expensive to pay back, you can lease the instrument instead. 
  • Requirements vary depending on lender and equipment type, however, most lenders grant loans to businesses at least 1 year that have up to $50,000 or more in annual revenue, and have a credit score of 650 or higher.

STEPS TO APPLY FOR AN EQUIPMENT FINANCING LOAN


There are several options online for anyone looking for options for equipment financing or other types of loans. Some examples are Lendio, SmartBiz, Bank of America, etc.

You get access to an unlimited list of options on this site, the necessary steps are also explained.

5. Bank loans


Another major means of getting a business loan is through the bank. Banks are one of the first options people consider when thinking of where to get financing to start or improve their business.

Banks have special business loan programs that allow business owners or prospective business owners to get loans, however, the process of getting a bank loan is tedious and it involves the bank scrutinizing your plans, your credit score, and the overall situation of your company. 

CHARACTERISTICS

  • They require collaterals.
  • Repayment plan depends on the type of loan, cordiality of the clients, and purpose.
  • The bank disburses the loan to the account of the borrower. If the borrower does not have an account, he/she would be requested to open one or the loan might not even be granted at all.In most cases, the bank does not disburse the whole amount of loan applied for, it pays cash lower than the loan demanded.

6. Business credit cards

This type of loan requires the least paperwork and is user-friendly. You get to borrow money with your credit card to be paid later.

You can access amounts up to $500,000 with a business credit card, with interest rates from 8-24%.

Money gotten from a credit card can be used for anything or any business.

CHARACTERISTICS

  • You can access the money quickly.
  • You may be required to provide business and personal information when you apply

Read: How To Become A Business Loan Broker In 2022| Expert Guide

STEPS TO APPLY FOR A BUSINESS CARD.

The first criteria for the eligibility of a business credit card are to ensure you are already in business when applying and also ensuring your business is legally approved.

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The next step is to pick the company you would be getting your credit card from.

There are several options of where you can get your credit card, some of them are American express, chase bank, discover cards, Citibank, well fargos, etc.

The next step to take after picking your preferred credit card vendor would be to fill out their application for a business credit card ( be rest assured it is slightly easy).

You will need to give basic personal and business information.

 15 ONLINE LOAN APPLICATION/ LENDING WEBSITES


In no particular order, these are 15 of the best loan application  lending websites

  • 1. LENDIO lendio.com
  • 2.  NATIONAL BUSINESS CAPITAL Nationalbusinesscapital.com
  • 3. FUNDERA BY NERD WALLET nerd wallet.com
  • 4. FUNDING CIRCLE Fundingcircle.com
  • 5.BIZ2CREDIT Biz2Credit.com
  • 6.  ONDECK Ondeck.com
  • 7. AMERICAN EXPRESS Americanexpress.com
  • 8. FUNDBOX Fundbox.com
  • 9. LENDING TREE LendingTree.com
  • 10. GOKAPITAL GoKapital.com
  • 11.BLUEVINE Bluevine.com
  • 12.  BOEFLY Boefly.com
  • 13. KIVA Kiva.com
  • 14.  KABBAGE Kabbage.com
  • 15. LOAN BUILDER Loanbuilder.com

FAQs ON BUSINESS LOANS

CAN I PAY BACK MY LOAN EARLY

 Usually, the repayment plan of each loan is dependent on the lender, the amount borrowed, and various other factors. Once you get a loan, how you are to pay back will be explained to you, however, it is possible to pay off your loan early or at once. Some lenders allow you to make early repayments without charging a prepayment penalty. However, it’s important to bear in mind that there might be extra costs if you decide to make early repayments, or even pay them back all at once.

WHAT IS THE HIGHEST AMOUNT I CAN BORROW?

Lenders have their own minimum and maximum loan limit. However, most lenders offer up to $5 million. 

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CONCLUSIONS

To determine which loan is right for you, carefully consider what your business needs the loan for, what repayment terms you can handle, and how much money you need.
The following are six popular loans among several others you might want to access.
1. Term loans
2. SBA loans
3. Business line of credit
4. Equipment financing.
5. Bank loans.
6. Business credit card 


Note that each loan type comes with its own set of terms and conditions as well as repayment plans. Be sure to follow them correctly to avoid issues.

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