How to Apply for a Small Business Loan

For a small business to get off the ground, or to keep one operating, it must have financing which is often in the form of a business loan. One form of small business financing is debt financing. Small businesses can apply to banks or other financial institutions, like credit unions, for commercial loans. Usually, banks do not make loans to start-ups, but they do make loans to ongoing businesses. These are the major steps you should follow through the loan application process.

    • 02

       Visit Your Local SCORE and SBDC Offices

      Especially if your business is a start-up, you may want to get some advice and help from experienced executives. If you have a chapter of SCORE in your area, they are a wonderful and free source of advice and help. SCORE is a non-profit, volunteer group of retired business executives. If you don’t have a local chapter, you can get online advice and online counseling. You may also have a local chapter of the Small Business Development Center (SBDC), particularly if you have a nearby university. The SBDC is part of the Small Business Administration (SBA) and exists to help existing and new small businesses. It will help small business owners with the application process for a small business loan.

    • 03

       Review Your Credit History and Credit Score

      If your business is a start-up or less than three years old, your personal credit history will be evaluated as well as your business credit history. Before you apply for a small business loan, take some time to get your personal credit history in order. Request your credit report from each ​of the major credit reporting agencies. Review these credit reports. If you see any errors on your credit reports, write the agency a letter and detail the error and ask for it to be fixed. If there is an error that the agency will not fix, file a credit dispute report. Check on your credit score. A credit score of about 700 is very good and significantly increases your chance of being approved for a loan.

  • 04

     Start Reviewing Your Borrowing Options

    Look at the commercial banks available to you. Don’t just go to the large, national commercial banks. You may have a better chance for a loan at the smaller regional commercial banks. Other non-bank institutions might be options for you such as credit unions. If you are a member of a local credit union, talk to the loan officer there about your need for a small business loan. If they make such loans, pick up a loan application there as well. There are other options such as ​microfinance loans that make loans to startups. If one lender turns you down, another may say yes to the same loan application so keep trying.​​

  • 05

     Prepare Your Business Plan

    This may be your most important step. In order to get a small business loan from just about any lender, you have to prepare a good business plan. In fact, until you have a good business plan, chances are you won’t even know how much money you need or how fast you can repay it. The business plan is in addition to the loan application required by the financial institution. Business plans consist of many parts. A good business plan will have several years of past and project financial statements for your business. It will include a statement of collateral or the type and value of assets you will use to secure the loan. You will need to include an analysis of the market your business will serve as well as a statement of your own experience.

  • 06

     Plan a Presentation and Make the Appointment

    In order for the loan officer at your financial institution to give your application for a small business loan a second look, you have to make it compelling. Prepare a presentation of your business plan and application for your loan officer. Put together a professional package to hand to your loan officer with a narrative plus any financial statements, spreadsheets, charts, and graphs necessary. Be sure and include an Executive Summary. Many loan officers read the Executive Summary first and decide whether they are interested based on that. Make an appointment with your loan officer and request enough time to do a short presentation, with visual aids, based on your business plan. Be concise, succinct, and organized.



Blog Source: The Balance Small Business | How to Apply for a Small Business Loan


I’m Joseph, and I started this blog as a way to share ideas with others. I wanted to create a space where people could share their thoughts and feelings, and where we could all have a good laugh. Since then, the blog has grown into something much larger than I ever imagined. We have posts on everything from humorous essays to comics to interviews. And our weekly columns cover sports, video games, college life, and software.
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