We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.
\r\nSo how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
"},"editorialNote":"Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on the page. However, this does not influence our evaluations. Our opinions are our own.","post":{"canonical_url":"/business-loans/guides/how-to-apply-for-a-business-loan","databaseId":42920,"id":"Y3VzdG9tX2xvYW46NDI5MjA=","date":"2020-11-01T10:56:13","modifiedGmt":"2023-03-08T20:41:59","title":"How to Apply for a Business Loan","uri":"how-to-apply-for-a-small-business-loan-in-3-steps","status":"publish","slug":"how-to-apply-for-a-small-business-loan-in-3-steps","link":"https://www.fundera.com/blog/custom_loan/how-to-apply-for-a-small-business-loan-in-3-steps","guid":"https://www.fundera.com/blog/?post_type=custom_loan&p=42920","seo":{"metaDesc":"Follow our seven steps and learn how to apply for a business loan—starting with the planning stages and finishing with the actual application process.","metaKeywords":"","metaRobotsNoindex":"","metaRobotsNofollow":"","title":"How to Apply for a Small Business Loan","opengraphImage":null,"twitterDescription":"","twitterTitle":"","twitterImage":null},"categories":{"nodes":[]},"fdsTableOfContents":{"tocheader":null,"enabled":null},"acfCustomLoanPage":{"categories":{"nodes":[{"slug":"/business-loans/","name":"Business Loans"}]},"pageSection":[{"pageSection":{"header":"Applying for a Business Loan","components":[{"fieldGroupName":"CustomLoanPost_Acfcustomloanpage_pageSection_PageSection_Components_Paragraph","content":"If you’re looking for financing for your business, you may feel overwhelmed by the thought of the process—planning, researching, and of course, actually applying for different business loans.
\nAlthough some of the overall application process will depend on the loan product and lender you’re applying with, there are a series of simple steps you can follow to learn how to apply for a small business loan—and we’re here to help.
\nIn this guide, we’ll break down each of the seven steps you need to follow to successfully apply for a business loan.
\nLet’s get started.
\nHow to Apply for a Small Business Loan in 7 Steps
\nIf you’re wondering how to apply for a business loan, you’ve probably already decided that you need one.
\nThis being said, the first step in the business loan application process involves planning: Why do you need a business loan?
\nAlthough this may seem like a question with an obvious answer, if you’re just starting your business, you may know you need financing, but you might not have determined exactly what purpose you plan to use your financing for. This is an important decision to make—as we’ll soon discuss, certain financial products are better suited for different purposes and some can only be used for specific purposes.
\nTherefore, you may determine you need a business loan for a variety of reasons, including:
\nUltimately, the possibilities are endless—and the reason that you decide to apply for a business loan should be unique to your business. Nevertheless, it’s important that you understand why you need a business loan first, and decide what you’re going to use the funds for before continuing through the application process.
\n","header":"Step 1. Determine Why You Need a Business Loan","button":{"link":null,"text":null}},{"fieldGroupName":"CustomLoanPost_Acfcustomloanpage_pageSection_PageSection_Components_Paragraph","content":"Next, after you’ve decided why you need a loan, you’ll need to determine how much business financing you need.
\nOnce again, determining the amount of financing you need will help you figure out which business loan product will be able to best meet your needs. As we’ll explain below, certain products, like SBA loans and traditional term loans, for example, are better suited for larger needs and higher amounts, whereas others, like business lines of credit and short-term loans, will likely be better for smaller projects and lower amounts.
\nTherefore, you’ll want to think about how much financing you need to serve your purpose—for instance, you might decide you need a $100,000 loan to purchase inventory. On top of this, however, you’ll also want to consider how much financing you can afford.
\nTo make this determination, you’ll want to consider your current revenue and cash flow, in relation to your expenses, as well as any current debts you owe. You may use a business loan calculator or calculate your debt service coverage ratio to help you figure out, realistically, what kind of business loan you can afford.
\n","header":"Step 2: Decide How Much Financing You Need","button":{"link":null,"text":null}},{"fieldGroupName":"CustomLoanPost_Acfcustomloanpage_pageSection_PageSection_Components_Paragraph","content":"Now that you’ve established why you need a business loan and how much financing you need, you’ll want to review your business’s qualifications.
\nAfter all, you don’t want to spend significant time and effort applying for a small business loan you would never be approved for. Ultimately, the specific business loan requirements you’ll need to meet will vary based on the product and lender, but there are three main factors you’ll want to think about ahead of time: your credit score, time in business, and annual revenue.
\nCredit Score
\nWhen you apply for a business loan, your personal credit score will usually be one of the first things that a lender looks at. If you have a high personal credit score, you’ll be more likely to qualify for a variety of loans—and loans with the best rates, terms, and amounts. On the other hand, if you have less-than-ideal personal credit, your options will be more limited, and you’ll want to be sure you pay close attention to minimum credit score requirements when looking at your different business loan options.
\nTime in Business
\nNext, you’ll also want to consider how long you’ve been in business. On the whole, businesses who have been in business for two years or longer will be able to qualify for the best business loans. This isn’t to say, of course, that there aren’t financing options for startups—however, just like you’ll have a more difficult time applying for a business loan with bad credit, your options will also be limited if you have only a few months in business.
\nRevenue
\nFinally, you’ll want to check to see what your annual revenue was last year, and in general, what your cash flow and business finances look like. Most lenders will have a minimum annual revenue requirement, as they’ll want to see that you generate enough money within your business to afford and pay back a loan. As you might imagine, the more revenue you can show, the more likely you are to qualify for a loan—and one with the best rates and terms.
\n","header":"Step 3: Review Your Business Qualifications","button":{"link":null,"text":null}},{"fieldGroupName":"CustomLoanPost_Acfcustomloanpage_pageSection_PageSection_Components_Paragraph","content":"What’s the next step in learning how to apply for a business loan?
\nNow that you’ve done the research necessary to determine why you need financing, how much you need, and what your qualifications look like, you’re ready to start looking for the right type of business loan for you.
\nAs we mentioned, there are a variety of types of business loans and certain products will be better suited for distinct purposes, amounts, and qualifications.
\nOverall, you might consider any of the following financial solutions:
\nOnce you’ve compared all of the different types of business loans and determine which one will best meet your needs, you’ll want to start shopping lenders.
\nAs you probably know, different small business lenders offer different products, and therefore, you’ll want to find a lender who not only offers the product that you’re looking for, but also one that has requirements you think you’ll be able to meet.
\nThis being said, as you’re learning how to apply for a small business loan, there are generally three types of lenders to consider: Bank lenders, SBA lenders, and online lenders.
\nThe next step in learning how to apply for a business loan is preparing the actual application.
\nOnce you know the type of business loan you’re going to be applying for and the lender you’ll be applying with, you can start filling out the application and gathering the documents you’ll need.
\nOn the whole, the application process will be specific to the lender you’re applying to—as we’ve mentioned, banks and SBA lenders will require significant documentation and many banks will require that you apply in person. With alternative lenders, on the other hand, you’ll very likely be able to complete your entire application quickly and easily online with limited documentation.
\nThis being said, however, there are some business loan requirements you can expect to provide regardless of the lender. These include:
\nOnce your application is prepared and everything is filled out completely and correctly, you’re ready to apply.
\nDepending on the lender, after you apply, you may receive an initial offer, or you may be asked for additional documentation. In any case, it’s important to respond quickly to any request or question your lender has, as this will help expedite the process.
\nAfter the lender has all of the information and documentation they need, they’ll start the business loan underwriting process to determine whether or not you qualify, and if you do, what loan amount and terms you’re eligible to receive.
\nAt this point, you’ve learned how to apply for a small business loan, and therefore, you’ll be ready to review and compare any and all offers you receive from different lenders.
\n","header":"Step 7: Submit Your Application","button":{"link":"https://www.fundera.com/apply","text":"Start Your Business Loan Application Now"},"rank":2}]}},{"pageSection":{"header":"Frequently Asked Questions","components":[{"fieldGroupName":"CustomLoanPost_Acfcustomloanpage_pageSection_PageSection_Components_FaqSection","header":null,"frequentlyAskedQuestions":[{"question":"How does a small business loan work?","answer":[{"content":"As you’re learning how to apply for a small business loan, especially for the first time, you may wonder how exactly business loans work.
\nUltimately, the way a business loan works, as you might imagine, depends on what type of loan it is.
\nThis being said, however, generally, when business owners are looking for a loan, they’re thinking about a term loan. With a term loan, you apply for financing from a lender, and if you qualify and are approved, you’ll receive the funds as a lump sum. The lender, of course, will determine how much you’re eligible to receive, as well as the rates and terms that are associated with the loan.
\nTerms on business loans can range from a few months to several years and this period will indicate the time in which you must pay back the loan, plus interest. Your lender will determine what your interest rate will be, as well as your repayment schedule. They may also charge additional fees that will contribute to the total cost of your loan.
\nOnce you’ve received the funds from your business loan, you’ll be able to use them for whatever purpose (unless the terms of the loan dictate a specific purpose) and you’ll make payments on your loan—daily, weekly, or monthly—until you’ve repaid what you’ve borrowed.
\n","header":null}]},{"question":"How long does it take to get approved for a small business loan?","answer":[{"content":"Once again, the time it takes to get approved for a small business loan will depend largely on the loan type and the lender you’re working with.
\nAs we’ve mentioned in this guide, bank loans and SBA loans will be slow to fund, and the process may take anywhere from a few weeks to 30 days or longer. In fact, the SBA loan timeline often ranges from 60 to 90 days from your initial application to when you receive funds.
\nWith online lenders, on the other hand, you’re more likely to be approved quickly, even within the same day as you apply. This being said, however, it’s important to remember that fast funding is often expensive funding, so lenders that offer approval this quickly will also charge high-interest rates.
\nSome online lenders, though, will be able to offer approval and funding within three to seven days, and these lenders will more than likely provide affordable financing as an alternative to a bank or SBA loan.
\n","header":null}]},{"question":"Do banks give loans to start a business?","answer":[{"content":"If you’re learning how to apply to a business loan, this may be your first experience with business financing—perhaps because you’re just starting your business. In this case, you may be wondering if banks give loans to start a business.
\nOn the whole, the answer is it’s very unlikely. Because of the risk of lending to newer businesses (and small businesses in general) banks usually only lend to those with excellent credit, a few years in business, and significant annual revenue.
\nThis being said, however, there are other startup business loans you can consider if you’re looking for financing as a new company. You may look into SBA microloans, short-term loans or lines of credit from online lenders, and business credit cards.
\nThen, once you’ve established your business, you’ll want to build your credit and grow responsibly—this way, you’ll be more likely to qualify for bank financing in the future.
\n","header":null}]}]}]}},{"pageSection":{"header":"The Bottom Line","components":[{"fieldGroupName":"CustomLoanPost_Acfcustomloanpage_pageSection_PageSection_Components_Paragraph","content":"Now that we’ve reached the end of our guide, you should understand how to get a small business loan.
\nAlthough some of your process will be specific to the type of loan you’re applying for and the lender you’re working with, you can follow these seven comprehensive steps to make everything move as quickly and seamlessly as possible.
\nUltimately, applying for a business loan may seem complicated but it’s often a necessary part of business ownership—plus, after you’ve completed the process once, it will only be easier to get through the next time.
\n","header":null,"button":{"link":null,"text":null}}]}}]},"acfAuthorByline":{"authorName":{"fdsAuthorBio":{"twitter":"mere_wood","linkedin":"meredithannwood","fieldGroupName":"fdsAuthorBio","emailAddress":"meredithw@nerdwallet.com","companyUrl":"https://www.nerdwallet.com","company":"NerdWallet","jobTitle":"GM, New Markets","affiliation":null,"alumniOf":"University of Evansville","award":null,"honorificSuffix":null,"knowsAbout":"business loans, business finance","biography":[{"content":"Meredith Wood is the founding editor of the Fundera Ledger and a GM at NerdWallet.
\nMeredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.
\n","header":"Experience"},{"content":"Meredith is a monthly columnist for AllBusiness, and her advice has appeared in the SBA, SCORE, Yahoo, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, MyCorporation, Small Biz Daily, StartupNation, and more.
\nMeredith recently contributed to Small Biz Daily on Using a Loan to Buy a Franchise, and to All Business on The Best Ways to Use a 0% Intro APR Business Card.
\n","header":"Featured In"},{"content":"Meredith has a bachelor’s degree in theatre performance and business from the University of Evansville.
\n","header":"Education"}],"avatar":{"title":"meredith-wood","sourceUrl":"https://assets-blog.fundera.com/assets/wp-content/uploads/2016/01/18115620/meredith-wood.jpg","slug":"meredith-wood"}},"firstName":"Meredith","name":"Meredith Wood","authorBio":{"company":"NerdWallet","companyUrl":"https://www.nerdwallet.com","description":"Meredith Wood is the founding editor of the Fundera Ledger and a GM at NerdWallet. She launched the Fundera Ledger in 2014 and has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending. She is a monthly columnist for AllBusiness, and her advice has appeared in the SBA, SCORE, Yahoo, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, MyCorporation, Small Biz Daily, StartupNation, and more. Email: meredithw@nerdwallet.com.","jobTitle":"GM, New Markets","gravatar":"mere.jpeg"},"slug":"meredith","url":null,"posts":{"nodes":[{"title":"What Is Debt-to-Equity Ratio (D/E)?: Definition and Formula","uri":"debt-to-equity-ratio","date":"2020-10-01T11:16:39"},{"title":"Year-Over-Year Growth: What It Is and How to Calculate It","uri":"year-over-year-growth","date":"2020-09-29T11:35:36"},{"title":"Collateral Coverage Ratio: Formula, Definition, and Examples","uri":"collateral-coverage-ratio-definition","date":"2020-09-29T10:18:19"}]},"avatar":{"url":"https://secure.gravatar.com/avatar/1d46d37bcf4c56922f7f3b2b6b6d86b1?s=96&d=mm&r=g"}}},"fdsRelatedPosts":{"fieldGroupName":"fdsRelatedPosts","header":"Related Posts","postCount":5,"automatic":null,"posts":[{"id":"Y3VzdG9tX2xvYW46NDAyMTM=","uri":"how-does-a-business-loan-work-find-out-here","title":"How Does a Business Loan Work? The Complete Guide","canonical_url":"/business-loans/guides/how-does-a-business-loan-work"},{"id":"Y3VzdG9tX2xvYW46MTA2NzEy","uri":"how-to-get-a-loan-to-start-a-business-in-4-steps","title":"How to Get a Loan to Start a Business in 4 Steps","canonical_url":"/"},{"id":"Y3VzdG9tX2xvYW46MzQwMTA=","uri":"20-essential-business-loan-requirements","title":"Business Loan Requirements: How to Qualify for Funding","canonical_url":"/business-loans/guides/business-loan-requirements"},{"id":"Y3VzdG9tX2xvYW46NDIxNzg=","uri":"the-average-small-business-loan-amount-in-2018","title":"Average Small Business Loan Amounts, Broken Down and Explained","canonical_url":"/business-loans/guides/average-small-business-loan-amount"}]}},"id":42920,"template":"CustomLoan","categorySlug":"","date":"2020-11-01T10:56:13"}},"staticQueryHashes":[],"slicesMap":{}}