Small Business Loans Don’t Have to Be Complicated: Read This Easy Guide

Are you an entrepreneur or small business requiring funding for your venture? Perhaps you don’t know where to head for funding or whether you’ll be eligible for a loan or not.

How to Get a Small Business Loan

Whether you’re thinking about applying for your first business loan or your tenth, if you have any questions or concerns about funding for small businesses, you’re in the right place, with this small business loan, financing, and funding roundup.

How to Apply for a Business Loan

You may be wondering how to apply for a small business loan and what documents you will need. Some of the key documents a business may need include:

  • an SBA 7 loan application,
  • a personal financial statement,
  • a business financial statement,
  • ownership or affiliate information,
  • business certificate or license,
  • loan application history,
  • income tax returns.

Before applying for financing, familiarize yourself with the different types of loans and funding, such as knowing the difference between a line of credit and a small business loan.

Do you know the small business loan procedure? If not, now’s the time to learn the different steps you’ll need to go through to get a loan, including choosing an SBA bank and filling out the SBA forms.

Bad Credit?

If you’ve got bad credit, are in significant debt, or had a business loan denied, all might not be lost. There are a number of lenders, such as Kabbage, Fundbox and BlueVine, that issue loans to businesses with a poor credit rating.

There are always ways to improve your business credit score and boost your chances of getting a loan, such as:

  • Developing a credit history for the business,
  • Not neglecting your personal credit score,
  • Choosing lenders strategically,
  • Keeping credit card balances low.

Consider the reasons why businesses may have trouble securing a loan or funding. For example, many business owners aren’t aware that external components such as social media can have an impact on a business’s credit rating, so if you’re thinking about taking out a business loan, think wisely about what you post!

As well as looking at what negatively affects a business’s chances of acquiring funding, be aware of the myths involving business loans, including:

  • It takes a lot of money to finance a new business.
  • Start-ups can’t be financed with debt.
  • Banks don’t lend money to start-ups.

Do You Require a Specialty Loan?

If you are a female, veteran or other type of minority borrower, you may be able to apply for a specialty loan for minority-owned businesses. For example, there is specific funding available for female entrepreneurs, including those offered by:

    • KeyBank,
    • Women’s Venture Fund,
    • Kiva,
    • Women’s Economic Ventures Loan Program.

    Be sure to look for the different funding options, such as franchise financing, available to small business owners who are regarded as minorities.

    Sustainable Energy Loans

    With a growing demand for businesses to become greener and more energy efficient, more and more businesses are turning to sustainable energy loans, providing them with the finances for the likes of solar energy equipment.

    Think About the Interest You Will Pay

    Naturally, when taking out any type of loan or funding, always consider the interest you will have to pay back on the loan. You should ideally look for low-interest business loans such as Google and Lending Club’s specifically designed loan for Google Partners.

    Peer-to-peer lending can also be a good option for small businesses, as the interest rates the borrower receives on peer-to-peer funding are based principally on their credit.

    Crowdfunding is becoming an increasingly popular way for entrepreneurs to get funding. This type of financing involves a large group of people contributing to your financial goal (usually in smaller amounts) in return for a small stake in your business.

    Similarly, angel investors can work well, providing you with a potential source of income to help your business grow.

    Government Grants and Other Alternative Funding

    Government grants might be an option for funding your venture. However, you should be mindful that government grants be used for the following:

    • Paying off debt,
    • Starting a business,
    • Covering operational expenses.

    Besides government grants, are you aware of the TrustLeaf loan start-up program, which enables businesses to invite family and friends to pledge support for a business venture?

    SBA-backed funding is another viable option for many businesses unable to obtain a loan through conventional means.

    Turning personal assets into loans, such as classic cars, high-end jewelry and artwork can be a solution to securing a business loan if conventional routes to lending aren’t successful for your business.

    Get Creative with Financing

    Get creative in the way you apply for a business loan by using the likes of the mobile lending trend. Kuna, Kabbage and Prosper, for example, allow businesses to apply for funds on mobile devices and access their accounts on smartphones and tablets.

    Online lenders can be another viable option for small businesses looking to secure financial assistance. Some of the top online lenders are:

    • OnDeck
    • Lending Club
    • Prosper Loans

    Senior entrepreneurs, those over the age of 50, seeking small business capital, should think of specific options like a government-backed business loans or borrowing against their retirement savings.

    Conduct Significant Research Before You Apply for a Loan

    Prior to applying for funding, do your homework on the different options available to you. Financial and loan-focused books can be a great place to start, as can reading the latest financial business planning news. Read tips from successful entrepreneurs and business finance experts and look at business indexes that offer insight into business funding.

    When researching the topic, take a look at what the dangers are of borrowing money the wrong way, and what the options are for bootstrapped businesses. Think about some of the most commonly asked business finance questions, such as how to avoid partnering with the wrong people, how to bootstrap your business as an alternative to outside funding and whether funding might mask underlying problems with a business. Using funding to solve cash flow problems is not always considered a wise business move.

    A recent report shows that small business loan approvals have hit a post-recession high. If you are thinking about applying for funding take advice from other entrepreneurs that have experienced success with business loans and other types of funding. Use this advice carefully to help secure the right funding for your business.

    Graph Photo via Shutterstock

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