What Do You Need To Qualify?

3+ Months in Business

You can qualify for our top financing options with as little as 3+months in business.

$15,000+ Monthly Gross Sales

The minimum revenue to qualify for financing options are $15,000 per month, or $180,000 in annual gross sales.

No Minimum FICO

We have financing options for all credit profiles. There is no minimum FICO score required to apply.

Get started today with our simple business loan application.

A natural question when deciding on growth opportunities or starting a small business is "How do small business loans work?".

Small businesses may borrow money from various lenders through small business loans. There are different types of loans available to help entrepreneurs achieve their goals. The way each loan works depends on the type of loan.

Maybe you've come up with a killer product. Maybe your business needs a piece of equipment to boost its growth. Perhaps you need to pay outstanding invoices in order to cover operational costs. Whatever it may be, it may be time for a loan.

What is a small business loan?

So let's talk about small business loans. To put it simply, a small business loan is any funding option specifically designed for small businesses. It allows existing or startup businesses to borrow money from various lenders. Various loan types exist to help entrepreneurs meet different goals.

In order to get the most out of your lending options, it is important to review just a few.

Term Loan - A standard bank-type loan. You receive the funding and pay off the principle plus interest over time.

Equipment Financing - An excellent way for a growing business to get an edge. You receive the equipment upfront and pay it off over the life of the equipment.

Accounts Receivable Financing - If you have large amounts of outstanding invoices, you can borrow against them. The invoices act as collateral and AR Financing offers lower rates.

Merchant Cash Advance - A merchant cash advance is borrowed against future credit card sales. A borrower then pays back a percentage of daily CC sales to the lender. So, you never have to see the payments!

Business Line of Credit - A business line of credit works just like a non-physical credit card. The owner of a small business is extended a line of credit and is charged the interest only or what is spent.

Requirements to Apply for Small Business Loans

Although specifics may differ, the basic requirements for small business loans remain the same.

Credit Scores

Because you are responsible for a small business loan, your credit score matters and has a significant impact on the loan amount. For businesses with multiple owners, lenders will ask for credit scores for each individual, as well as your overall business credit score. Make sure that your credit report is accurate before applying for a loan at the bank. It may also be necessary for you to boost your score a little bit if you are close to a higher threshold.

Business Banking Records

The bank needs to review your business banking records to make an assessment of the foundation and determine the business' borrowing capacity. Follow these tips to ensure you are in good standing:

  • It’s ideal to maintain a steady balance with regular deposits to demonstrate consistent revenue and responsible financial management.
  • Avoid overdrawing your account and set up overdraft protection.
  • You may want to ask for a bank reference from your company’s banking institution. It could go a long way in convincing a lender.
  • Of note, most lenders like to see companies in business for at least 6 months, so you may be asked to show time in business as well.

The bank will consider certain key numbers when determining your rating and loan amount. Lenders are interested in a broad approach, so they will inquire about annual gross sales, as well as monthly numbers for:

  • Gross margin
  • Cash flow
  • Debt to equity ratio
  • Accounts payable and accounts receivable
  • Earnings

Monthly Sales Volume or List of Collateral and Assets

Depending on the lender, collateral may be requested or not. In most cases, you will need to list company assets in your application. The lender wants to know what will cover your obligations if you can't repay the loan. Alternatively, you can provide proof that you have sufficient deposits in your business bank account to satisfy the lender that loan payments can be met.

Benefits of Small Business Funding

What type of financial support do you need? Wondering “where can I go to get a small business loan for a new business?”. There are many benefits to obtaining a small business loan. You can use them to keep control of your business and profits, avoid problems with loans from family and friends, and safeguard your personal assets.

Your capital needs will vary depending on whether you are purchasing equipment, additional inventory, or expanding your leasehold, or if you are seeking long-term financing for expansion and growth.

Sometimes, a simple line of credit is all you need to make purchases, pay payroll, or finance accounts receivable. According to CB Insights, 29% of businesses fail because they run out of cash despite new options for small business loans.

Simple Business Loan

After completing this simple application, you'll be paired with a dedicated Business Financing Advisor to choose the best financing options for your business!

Steps to Getting a Small Business Loan

1. Gather required documents needed for funding

Having these documents available will expedite lender approval and help determine the loan amount and terms.

  • Social Security number or Tax ID
  • Business licenses and filings
  • Tax filingsProfit/loss statement, balance sheet, bank statements
  • Review individual lender for additional documents

2. Understand Different Small Business Funding Options

Traditional Bank Loans: Borrowers of traditional bank loans pay back the loan in monthly installments. These loans usually have a fixed amount. For existing businesses, the most common type of loan is a line of credit, which the borrower can access from the lender. The interest rates on these loans are lower than those on non-traditional loans, but they require a higher credit score.

Revolving Lines of Credit: The key difference between a revolving line of credit and an ordinary line of credit is that once a borrower pays back borrowed money, the credit limit goes back to its original amount, thereby allowing them to borrow again. The most common method is using a credit card, but this method is only recommended for small purchases. Other forms of revolving credit would be better suited for large needs.

SBA Loan: These are loans from the Small Business Administration, a federal government agency. Although they do not make loans directly, the SBA helps minimize the risks to lenders that administer them.

3. Apply

With your research complete and information and documents at hand, a small business can take the steps needed to stay in business during this time of uncertainty. Businesses should not wait until they are desperate for assistance. Applying and being approved will provide access to what may be vital funding.

What Are Average Small Business Loan Rates?

Getting the most out of your business funding requires understanding the ins and outs of different small business loan types and rates.

The loan rates will vary according to the type of loan you are applying for. It also varies depending on how much you need and the terms.

Small business loans from alternative lenders can also be more expensive than traditional bank loans. A tradeoff exists, however, since some business owners may not qualify for financing from a traditional lender. However, a new alternative lender may be able to fill that gap.

Interest rates on small business loans can range between 2 percent and 13 percent on average. A SBA loan has a narrower range, ranging from 3.5 percent to just over 11 percent.

How to Get a Business Loan Without Collateral

To obtain a small business loan without collateral, you need to do your due diligence. Here are a few steps you can take to improve your chances.

Get Your Credit Score in Shape

In the absence of collateral, you can only offer your reputation, which is essentially your credit. One way to raise your score is to lower your credit utilization ratio; which is one of the only ways to get a small business loan with bad credit.

Determine Cash Flow Projections

Knowing how to repay your debt is important. Otherwise, you'll have a hard time convincing lenders you can repay your loan.

Once you have everything you need to qualify for a small business loan, go find the lending option that secures your financial future. A number of lending options are available to help you.