You might also end up with lower loan amounts and higher interest rates than a more well-established business owner. Getting a business loan involves figuring out the right loan for your needs, comparing lenders, gathering the proper documentation, and completing an application.
Some lenders specialize in offering business loans to borrowers who have bad personal credit scores. However, If approved, a lender will most likely charge you a higher interest rate. Although most lenders have annual revenue requirements, it’s possible to get a business loan if your business doesn’t have any money. Some lenders offer no doc business loans—loans that don’t require verification of business income. To qualify, you’ll likely need to have excellent credit and provide a personal guarantee.
What does it mean to refinance a business loan?
Lenders are typically more willing to take on 100 percent financing because they can seize the collateral or assets to repay the loan if you fail to make payments. You can also find startup loans for small businesses from online lenders. Online lenders often offer a streamlined application process and faster funding times than traditional banks. You can find startup business loans from various lenders, including banks, online lenders and credit unions.
For example, when it comes to SBA loans, you’ll typically need a minimum business credit score of 155 to pass the SBA’s pre-screen process. However, most lenders set their minimum score requirements between 160 and 165. Information you must provide to start an application could include your business name, the date you started the business, gross annual revenue and annual household income for all owners. Brick-and-mortar banks tend to have more stringent eligibility requirements compared to online lenders; having strong credit and financials may be necessary to qualify. One disadvantage of applying for a business loan with a bank is that it often has more stringent eligibility requirements.
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Historically, lenders have used slightly different tools and combinations of information to evaluate the risk of making business loans. The lender collected lots of documentation hoping all that paperwork would contain reasons to approve or deny a loan request. So, yes, borrowing might seem daunting at first, especially to first-timers. But How Can I Get a Business Loan if you’re new to the world of finance, having realistic expectations of how things will proceed is essential for making sound decisions about the future of your business. Knowing about the ins and outs loan underwriting process is the first step. So as you apply for a small-business loan, make sure you’re applying for the right size loan.
Repayment terms may also stretch out longer than conventional loans, ranging from five to 25 years. And if you find yourself in a tight spot with repayments, your lender may be willing to work with you to defer payments or restructure the loan. You can start your banking relationship by opening a business bank account at your preferred bank. Getting a business loan requires careful research and consideration to make sure you’re choosing the best funding option for you. Different loans serve different purposes, so researching loan options is a good starting point. Bankrate’s editorial team writes on behalf of YOU — the reader.