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June 20, 2017

Things You Must Do to Secure a Small Business Loan

Perhaps the most potent hurdle small businesses face is getting funding, like a business loan. The lending standards set aside by most banks are rather stringent because they want to recover their money and do not want to invest in unreliable businesses. While the requisites may seem unrealistic now, they are quite attainable if you go about your affairs the right way. There are certain steps that will let you get the loan you need to fund inventory, payroll and everything else.

The First Step: Figuring Out Why You Need the Money

Every single potential investor will ask you “why do you need the loan?” Whether you want to start, expand, have some backup, or just get by, you need to know what you want to do. These reasons will also dictate what kind of small business loan you apply for, which is the next logical step.

The Second Step: Decide Loan Type and Lender

Since lenders need cash flow to be confident in investing, any startup or business in its first year is automatically disqualified from most loans — you are better off trying to raise money from VCs or crowdfunding, credit cards or loans from friends or family. Established businesses have other options though, like term loans, SBA loans, invoice factoring and lines of credit. There are various types of lenders like banks, online lenders, and non-profit micro-lenders and so on. As a rule of thumb, choose banks if your credit is good, if you are OK with slow disbursal, and can provide collateral; otherwise go for the other two.

The Third Step: Determine Your Eligibility

You need to learn about the eligibility criteria. Here are some things that play a pivotal role in you qualifying or not qualifying for the loan.

  • Credit Score: Your credit score would help in identifying the small business loans you could apply for. You could get your credit report from any reputed credit bureau, such as TransUnion, Equifax or Experian.  You could easily have access to your FICO score completely free online from various credit card issuers and even finance websites. Banks would be offering you the cheapest small-business loans and they insist on approving loans to only those who have credit score minimums of 680 and onwards. If your credit score is less than the stipulated one, you could apply for loans from any non-profit micro-lender or access small business loans online meant precisely for individuals with bad credit.
  • Your Business Longevity: The lenders are not only interested to know about your credit history and precise credit score, they very much want to know the smallest details about your business, including how many years your business has been in operation. Moreover, it is mandatory for you to be in business at least for a year to qualify for small business loans online. You could qualify for most trustworthy bank loans if you are in the business for at least a couple of years.
  • Are You Making Enough Money? Several online lenders make it compulsory for business owners to make a minimum of $50,000 to about $ 150,000. If your income meets the expectations of the lenders, you could get the small business loan.
  • Can You Repay the Loan? You must determine your exact cash flow and other details of your business financials. You must calculate accurately how much you could spend on a monthly loan repayment.


Once you have determined that you are able to make monthly payments, it is time to get started on your business loan application with the help of all the mandatory documents that support your eligibility.


Isabella Rossellini is a finance consultant at a private firm that seeks to provide assistance to startups and small businesses in getting funding, navigating debt, budgeting, cash flow, and other hurdles. She also enjoys sharing articles and referrals of good resources like on her blog.