Business loans can provide the capital to finance expansion to pay employees and cover other expenses. Before you apply, be sure you understand how these loans operate and what paperwork you will need to provide to your lender. Also, be aware of how long the application process could take and the fees you may incur.
Common uses for business loans
A business loan can aid in the payment of unexpected expenses such as a damaged chair at work or the COVID-19 Pandemic. In addition, you may require financing to cover an unavoidable capital expense, like replacing or upgrading technologies, purchasing manufacturing equipment or renovating a retail store. Some lenders offer credit lines that let you draw funding according to your needs and with a limit and interest only charged on the amount that is used.
Eligibility requirements and application process
To qualify for a business loan, you typically need to provide complete information regarding your company, such as the official name of the business as well as tax ID numbers and financial documentation. This may include business plans, proposals, and profit and loss statements along with the names and Social Security numbers of those who control 20 percent to 25 percent or more of your business. Some lenders require that you have been in business for a minimum of one year, while some will accept startups, or do not have any time-in-business requirements.
A mentor or advisor can guide you through the process of obtaining a business loan. SCORE, for example, has an extensive network of business mentors who offer free or low-cost advice to founders of startups and small businesses. It is possible to search for a local chapter to connect with an advisor in person.
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