Simple Ways to Acquire a Business Loan When You Need One
November 7, 2022 | Last Updated on: January 27, 2023
November 7, 2022 | Last Updated on: January 27, 2023
In this article, we cover:
With preparation and readiness, acquiring capital can be a simple process for your business. To help simplify the process, we break down key steps of the loan acquisition process including what documents to gather, the application process, and qualifications. Not all loans are equal so we review common business loan options, SBA loan programs, and loan alternatives.
Generally speaking, acquiring a small business loan is simpler when going through an online lender vs a traditional financial institution like a bank or credit union. Because online lenders are not regulated the same way as traditional lenders, they can provide faster approval times and funding speeds. For certain financing options, some borrowers may receive approval and possibly the funding itself on the same day.
Loans from banks or credit unions are typically more highly regulated which translates to tougher eligibility, borrowing, and credit requirements. The process of getting a loan from a bank or credit union is more rigorous, can take longer, and sometimes requires an in-person visit to finalize the loan. However, in some cases, this means that to be competitive traditional bank loans might be offered at lower interest rates so it’s worth including them when researching small business lenders.
The entire business financing process using an online lender can be very simple relative to a traditional bank. Using an online lender, you can expect to encounter a fully online business loan application process that might look like this:
Reputable online lenders are just as safe as loans from large banks. However, it’s always a good idea for business owners to do their due diligence and research online lenders’ reputation by reading online reviews, consumer reports, etc.
The first step to simplifying the capital acquisition process for your business is to understand the loan options. Not all businesses qualify for all loan types. However, once you know what loans will work for your business, and how to qualify for them, acquiring them can be simple. Let’s review a range of business loan options, the types of businesses that are eligible, and high-level qualifications. Keep in mind that different lenders will have different requirements based on your situation. The numbers below are meant to give you a general sense of what to expect:
Individual lenders determine credit, revenue, and time in business requirements for SBA loans. Your lender will help you figure out which type of SBA loan is best suited for your needs. The SBA has small business financing options for both new and established businesses but having a good credit report is key. The SBA recommends all businesses establish and maintain a good business credit score because existing businesses can have an advantage with an established credit history. Because loan eligibility for new businesses is typically based on its owner’s personal credit score, establishing and maintaining a good personal credit score is important too. Bad credit history is one of the main reasons why SBA loan applications for small businesses get declined. In an article written by the business credit bureau Dun & Bradstreet, they offer tips and best practices for businesses on how to establish and build business credit. Let’s review the different types of business loans the SBA offers:
In addition to business loans, there are other capital options for your business that can be simple to acquire. The main benefit of these options is that they can be established before your business needs capital. Once the need for capital arises, you can simply tap into them. Let’s review two options and discuss how they can be simple ways to acquire capital:
Additionally, a merchant cash advance can be a viable loan alternative for businesses with strong cash flow. A merchant cash advance is not a loan and it gives you access to funds based on your future sales or accounts receivables.
You can make the business loan acquisition process simple by having your documentation updated and ready to go. Even if there is no pressing need for a loan, having the documentation easily accessible will make it simple to acquire a business loan when you need one. Banks or credit unions typically require more documentation and have stricter eligibility requirements than an online lender. Depending on who you use to fund your loan, you might need these documents:
For new businesses, lenders will likely want to look into personal finances to determine creditworthiness and repayment terms. Additionally, a new business owner might need to collateralize the loan with a personal guarantee by using assets such as personal property, cash, stocks, car, boat, bonds, insurance policies, and equipment as collateral for the loan.
For entrepreneurs whose most precious resource is time, or first-time borrowers overwhelmed with the application process, a business loan consultant can be worth the investment. Business loan consultants are a fee-based service that can help a small business owner navigate the entire process and help determine the best small business loan for your needs. Business loan consultants can identify the right loan product based on your business and streamline the loan process. They will help gather the correct documents, prepare applications, submit paperwork, and work directly with the lender on any follow-up questions to help prepare a business plan. For more information, read our articleHow to Find Business Loan Consultants Near Me.