15 Sep, 2021

Get The Insights - How To Get A Business Loan With No Sweats!

Get The Insights - How To Get A Business Loan With No Sweats!
Written by: - Phil Baker

The 4 simple steps to get a business loan:

  1. Choose The Right Type Of Business Loan That Suits You 

  2. Identify If You’re Eligible

  3. Choose The Most Suitable Lender For Your Business Loan

  4. Getting All The Information And Applying For Your Loan

Business loans are very important to maintain cash flow in the business. A substantial amount of capital is needed to run the business smoothly and boost the amount of profit earned. But how to get a business loan easily is the main question. From expanding the business to hiring new staff or buying advanced equipment for work, every development requires funds, and those funds can be of great assistance. Even a small business loan can bring about drastic changes.

Your business may be at any stage of development; a little more cash and a small business loan can always come in handy for the progress. This requirement has particularly increased during the COVID 19 crisis as this pandemic has had a big impact on all sorts of business communities. A small business loan is the most desired form of funding. Here are four steps to getting a business loan, whatever your background or business situation may be.

1. Choose The Right Type Of Business Loan That Suits You 

The first step is to decide which type of business loan is right for your circumstances. This will usually depend on the reason for getting the loan as there are different options depending on where the funds are to be utilized. But another key factor will be the timing at which access to the loan is required, as in some cases, you may get the funds after quite a long duration of time.

Government Loans 

If you are asking yourself the question 'How to get government loans to start a business? Here's the answer. The government has started an initiative to provide citizens with better options for business loans. Government loan programs offer financial support to those who are starting or expanding their business.

This helps those people who may have trouble getting a traditional bank loan. You can choose any of the options from the different types of government loans to start a business provided to citizens according to your needs.

Banks For Small-Business Loans 

How to get a business loan from a bank? Banks provide the best options for small-business loans. If your company has been working for more than a year and doesn’t need cash immediately, this is the best option. Approvals can take a very long time — even with good credit. Banks approve only about 13% of business loan requests, according to the latest research. This means the right bank offers the best type of business loan you need and also gives enough loans to make financing easy. 

Some of the banks listed below can offer a solution to your provider if you are searching on how to get a business loan from a bank:

  1. Bank of America

  2. JPMorgan Chase

  3. Citibank

  4. Wells Fargo

  5. PNC

  6. U.S. Bank

Microloan

These lenders don't take your credit into account as much as other lenders do, but your credit profile still matters somewhat. These lenders are also more eager to work with fresh businesses with loan amounts much smaller (up to $50,000), hence given the name micro. For these loans, you can get an answer within three months with rates that are almost similar to better credit cards.

Non-Bank Online Loan

Online business loan lenders are becoming the first choice of many small businesses today due to their immediate response to a loan application and the speed with which they make funds available. If you’re able to afford a higher APR and you can return the loan to the lender in less than five years, you could possibly get a loan for between $25,000 – $500,000.

Credit may be important, but revenues are often more important. Many online lenders can approve your request for a loan on the same day and arrange the money within a day or two. Some other types of business loans include the following options :

Business Credit Cards

Business Credit cards are great sources of loans for younger businesses. They can provide good short-term funding solutions. It is easier to qualify for a business credit card loan rather than other options, and you can get approval as soon as three weeks.

Vendor Financing

This is a very overlooked option of all, but it can also be used. The lender may not charge any interest to the borrower, but the return time of the loan is very short, consisting of days.

Lines Of Credit

One final option for an already running business is the line of credit. This is traditionally a well-known source of funds for many business owners, but depending on the lender can be more difficult to get. Credit score and revenues are mostly the significant factors for these loans, which range from $1,000 – $100,000 for qualified applicants. This is one answer to your question: How to get a business loan?

2. Identify If You’re Eligible

There are a lot of factors that influence if you are eligible to get a small business loan. If you understand these factors and work on them, you can improve your chances of getting the loan easily. By choosing which loans you are best eligible for, you can focus your time and energy on those that are most likely to accept you. It also saves you from the frustrations and wasted time on requests to banks with highly strict eligibility criteria.

The most important factors that lenders typically consider are: 

  1. Applicant’s credit reports can have a huge impact on the lender’s decision history of making timely payments under credit cards, previous loans, and vendor contracts. That is why your clean record is very significant.

  2. For how long the business has been running also is very important as the lenders favor the more experienced ones.

  3. Applicant’s ability to pay back the money that was also borrowed matters, as well as the assets involved in the business.

  4. What you can offer as collateral is also an important factor. These are known as ‘secured loans' because the borrower provides security. This can be done by putting up your home, car, or equipment as collateral. The lender may use this as a sort of insurance to protect them from loss.

  5. How customers pay the applicant, whether it is through cash, credit card, etc.

Lenders ultimately decide and judge whether or not to make a small business loan based on the applicant's credit and risk profile and all the factors mentioned above. Want to read something different? Click here in order to get to know how much life insurance is needed by a person.

3. Choose The Most Suitable Lender For Your Business Loan

Once you have gathered the information about all the available loans and also what type of loan you are eligible for, now it is time to select your best option of a lender. There can be multiple options to choose from, like government plans, bank loans, online lenders. In order to get the best deal, you must consider all your options and what they are offering you very carefully.

Key points to be kept in mind while choosing a lender:

  1. Have they provided Loans to similar businesses in your industry?

  2. What does their application process include, and what are their requirements?

  3. How quickly can they see and approve your application?

  4. Are there any payments involved in addition to the interest? Is it economical?

  5. How quickly can the funds be transferred?

  6. Does the lender require collateral or security?

  7. Is refinancing an option?

  8. What are their personal or business credit profile conditions?

Thinking about these factors will guide you to find a good deal and apply to the best lender for your situation, eventually solving your problem of how to get a business loan.

4. Getting All The Information And Applying For Your Loan

In the case of a bigger and more formal one, you may require a lot of documentation to get the approval for your loan. For example, getting a loan from the Small Business Association (SBA). These are some of the things you should get in line to get the approval of your lender. These are just a few of the most common things they’ll ask for, but this is not an exhaustive list:

  1. Business and personal credit profiles 

  2. Business bank account statements of previous years

  3. Documents for both your business and personal tax accounts.

  4. Any applicable licenses and registrations required for doing business in your city 

  5. Other financial documents considered relevant (i.e.d credit card sales, accounts receivable due to you, and unpaid invoices )

  6. Any legal contracts that would be relevant to the business (incorporation, leasing, franchise, etc.).

The lender carefully analyses your bank statements and accounting records and then decides about your loan, so they should be accurate, complete, and thorough. They will review your income and loss statements and your cash flow statements. You may want your accountant to remove the issues that a lender may raise and also get your statements reviewed by a CPA(Certified Public Accountant).

The rules for applying to get a loan are pretty much the same for everyone, whether you are applying from the comfort of your home or you are sitting in your office. Filling out the application may take time, but thanks to the documentation you gathered before, this task of applying for your most suitable loan is not going to be very tough. Depending on the type of loan you chose, you may have to wait for another six months to get a response from the lender; if you are lucky, you may even get a reply in 24 hours, depending on your loan!

Key Terms To Be Analyzed Before Applying For A Loan

  1. What is the interest rate on a loan, and how can it vary over the time period? 

  2. How frequent are the loan repayment installments? 

  3. How much is the loan origination fee and all the other costs payable (for instance, underwriting fees, administration and loan processing fees, etc.)?

  4. What are the operating covenants being imposed by the lender on your business (some of these covenants may include a maximum debt-to-equity ratio or a minimum cash inventory maintained by the company)?

  5. Is the lender restricting the usage of the loan? 

  6. Can the loan be repaid early without a penalty? If no, then is the penalty being charged affordable?

How Hard Is It To Get A Business Loan?

According to recent studies, it has become extremely difficult to get a loan of any type. This is evident from the following: 

  1. According to a survey, 27% of businesses were not able to get the business funding they needed.

  2. Only 33% of SBA loan 7a applications are approved. 

  3. Among these approved applications, 72% were given to businesses owned by males, and 42% were 2-year-old businesses.

  4. Only 3% approvals were given to black people and 7 percent to the Hispanic background.

  5. 82 percent of businesses that fail each year state that it was due to a lack of funds.

Then, how to get a business loan, and how hard is it to get a business loan? According to the facts and figures mentioned above, you just have 1 in 3 chances of getting your business loan approval. If you are not a male or you are from a black or Hispanic background, then your chances may be significantly lower. However, you have greater odds of getting a small business loan if you find an online lender or an organization that’s dedicated to your success.

Bottom Line

Small Business Loans are of great importance for any type of business. Many lenders are available these days, but you should know about your best option and what these lenders look for while selecting to provide the loan. With all the knowledge about how to get a business loan, things become easier and simpler for small business owners who plan to manage all aspects of the business on their own. 

Business owners can greatly increase their chances of getting themselves a beneficial loan and giving their business a boost by knowing the above-mentioned information and knowing beforehand what the lender anticipates from them as a customer. Whatever your businesses may be, remember to document your employees’ paystubs by creating them with the paystub generator. Try it out today!

Create Your Pay Stub Now!

It takes an average of less than 5 minutes.

How are you paid?
Employment status
Select your state
California
Create your paystubs in 4 easy steps
Your Pay stub Sample in black and white