Small Business Loans
Receive a lump sum of funds to use for any business purpose. Getting a business loan can be the biggest challenge for a small company. According to the US Small Business Administration, there are over 30 million small businesses in the United States. Getting a business loan is a highly competitive task, here’s what you need to know.
How Do You Qualify for a Small Business Loan?
- 1+ Year in Business
- $500,000+ in Annual Revenue
How Small Business Loans Can Help You?
Like loans to individuals, small business loans are designed to provide needed capital to companies. However, with loans to small businesses, there are many more options and loan types. At a high level, business loans are generally categorized by the length or duration of the loan repayment period, long-term loan versus short-term funding.
Small business loans are simply funds paid out to companies that require the company to repay the loan with interest and applicable fees over a specified period of time. Because businesses vary in size and function, not all business loans are right for all businesses. Therefore, business loans involve many options and criteria for the structure including use of proceeds, capital disbursements, repayment period, interest rate or factor rates, and fees.
What Is a Small Business Loan?
A small business loan provides funding for entrepreneurs to tackle challenges, take advantage of opportunities, and invest in their businesses. You can use the funds for almost any business purpose, including working capital, equipment, expansions, payroll, and other investments.
The borrower is expected to pay the principal, plus interest, in full within the term outlined in the loan agreement. The length of your term depends on your needs and the financial background of your business, but keep in mind that the lender you’re working with plays a major role in this as well.
Short-term business loans are best for short-term revenue-driving opportunities and challenges that you need to plug quickly. Long-term business loans, on the other hand, are better suited for expenses that won’t benefit your business immediately, like opening a new physical location or purchasing a new business entirely.
Pros and Cons of Small Business Loans?
Small business loans aren’t for every entrepreneur. Your business might need funding, but another type of financing could suit your needs better.
Let’s explore the pros and cons of small business loans, so you can make an educated decision for the future of your business.
Pros
- Lump sum payment to invest in your business
- No exchange of equity
- If lender reports to a business credit bureau, repayment can strengthen your business credit score
- Consistent, timely repayments can build creditworthiness and credibility with your lender
- Stagnant payment schedule
Cons
- Not as flexible as business lines of credit
- If you need additional funds, you’ll have to take out another loan
- Interest rates can be higher than other forms of financing
- May need to offer collateral
Small business loans are a great option for projects where you know the exact cost or for working capital to manage through a slow season. If you need more flexibility, business lines of credit offer access to capital on an as-needed basis.
How Can You Apply for Small Business Loans?
Whether your small business is growing or facing a challenge, you need cash to cover the expenses. Finding the best small business loans gives you the resources you need to pursue opportunities or solve problems.
Unlike selling equity, getting a small business loan allows you to maintain business ownership, profits, and full control.
There are countless fast small business loans available on the market today, but to truly invest in your future, you need the right one.
Our diverse lender marketplace puts all your options in one place, allowing you to receive multiple offers with one application and compare them with expert guidance.
Applying is fast, simple, easy, and doesn’t affect your credit score.
How to Use Business Financing to Grow?
Every owner wants to grow their business, but doing so requires money. The only ways you can grow your business are by reinvesting profits, raising equity, or using small business loans (or another business financing option).
At first glance, reinvesting your profits is the cheapest option. But, with working capital covering every cost, it can take years for you to reach your goal.
Utilizing small business loans for start-ups and other types of businesses can actually be more profitable for your business in the long run. You can obtain cash to cover all growth-related expenses right away, putting you on track to boost revenue as soon as possible.
Here are some of the ways financing can help your business:
Grow Your Business – Financing gives you access to the cash you need to fast-track projects and scale your business. You can use funding to open a new location, hire new employees, invest in marketing campaigns, upgrade internal processes, and much more.
Cover Expenses – If you’re unable to meet your business’s day-to-day expenses, you could find yourself in a situation where your goals are side-tracked or, at worst, you have to close your doors. When cash flow gets tight, financing can help you cover your most critical expenses like payroll, utilities, supplies, inventory, travel costs, and more.
Buy Inventory – Retail businesses are well-aware of the issues that can arise out of delayed inventory, including revenue loss and poor customer experience. Stocking up on supplies early can help you mitigate potential problems and prepare for busy seasons beforehand.
Have Extra Cash on Hand – Any business owner knows that there’s always a chance the unforeseeable can happen. You could find yourself stuck with an unexpected expense or even presented with a fast-paced opportunity. In either case, additional access to capital will keep you prepared for whatever happens.
Buy New Equipment – Heavy equipment like machinery and vehicles are oftentimes the backbone of construction, trucking, and manufacturing companies. However, every business relies on equipment in one way or another. Funding can help you upgrade your computer software systems and other technology inputs to boost efficiency and productivity.
Weather Seasonal Slumps – Many industries experience slow seasons. It can be challenging to navigate operating expenses and make preparations when your cash flow is tight. Financing can help you weather the storm now while also giving you the means to put plans into place for the upcoming busy season.
Eligibility Requirements for Small Business Loans?
To apply for small business loans, the first thing that you will need to consider is the lender. Lenders may have different guidelines, requirements, and application processes, but the standard eligibility requirements are:
- Credit Score – Most lenders want to see a 680+ credit score. Some lenders don’t uphold credit score requirements, but you should expect them to mitigate their risk in a different manner.
- Time in Business – Newer businesses are more likely to fail, and lenders are well aware of the statistics. You’ll need to have some experience in order to secure financing. While most banks require 2+ years in operation, non-bank lenders typically want to see at least one year in business.
- Annual Revenue – Your business’s profitability is the number one indicator of whether or not you’ll be able to pay back the borrowed amount within the term. Most lenders need to see at least $500,000 in annual revenue. If you generate more, your terms will only increase from there.
Most lenders, especially banks, will want to see a minimum credit score of around 680. This is also typically the requirement for SBA funding as well. Of course, having higher credit can boost your approval odds and help you access better interest rates.
At Global Rapid Funding, you can find options regardless of your credit score. We have programs for small businesses with good credit, bad credit, and everything in between.
Showing a profit helps, of course, but is not always essential to receive financing. Instead of focusing only on your business and personal credit scores, we consider your annual revenue and how your new opportunity could help you grow.
What Are Secured & Unsecured Business Loans?
The difference between secured and unsecured business loans is simple. Secured business loans require collateral, such as real estate, heavy machinery, or other assets, while unsecured business loans don’t require any collateral as a guarantee for being able to pay the loan.
With secured business loans, the borrower agrees to give the lender an asset or piece of property if they’re unable to repay their debt. Collateral can make the financing process less risky for lenders.
Banks and other lenders have more certainty that they will get their money back in the event you default. This can translate to lower interest rates, higher funding amounts, and better terms for borrowers.
Typically, traditional banking institutions will require your loans to be secured with collateral, like real estate or heavy machinery.
Unfortunately, borrowers face additional risks with secured business loans. In case you are unable to meet your debt obligations, you could risk losing the asset you’ve put up as collateral.
In the modern business financing world, however, you can find small business loans without collateral.
If you have collateral to back your small business loan, then you can choose to put it up. If not, then you can still find financing options. We can help you find either option within our marketplace.
How it Works?
You’re only a few clicks away from the capital you need to reach your full potential.
- Apply Securely Within Minutes Move through our streamlined application within minutes and upload your business documents with zero risk.
- Review Your Offers Compare your offers with expert advice from our team and select the best one for your specific circumstances.
- Get Funded With your money in hand, you can take advantage of opportunities and tackle challenges with confidence.
Small Business Loan FAQ’s:
It depends. Some lenders can be more difficult to get approved for. For example, banks and SBA loans tend to feature the strictest requirements. However, online lenders are more lenient and more likely to offer a wider range of small business loans.
It’s best to apply for small business loans strategically. You should apply with both bank and non-bank lenders to get a general understanding of what your business qualifies for and, more importantly, ensure you have options to choose from.
Most lenders will need to see a 580 to 620 credit score at a minimum to approve a business for a small business loan. Banks and credit unions are a bit more restrictive, with a 700+ minimum FICO requirement.
Some non-bank lenders work with businesses with poor credit histories. However, these lending institutions often impose higher interest rates as a trade-off.
Small business loans typically don’t feature a set minimum amount, although many lenders will only work with businesses seeking $10,000+. If you’re seeking capital below a lender’s minimum funding amount, consider using business credit cards, personal investments, or fundraising to achieve your goals.
There’s no limit to how many times you can apply for small business financing. You can even apply for additional loans while you pay off your original one. Some lenders, though, see a borrower with multiple loans as inherently risky, so you might find it challenging to secure financing if you have existing loans.
Unsecured loans have no collateral requirements, whereas secured loans are backed by collateral. Secured loans are generally easier to obtain because the collateral offering mitigates some of the lender’s risk. If the borrower were to default, the lender can seize the collateralized asset and recoup some of the lost cost.
Unsecured loans are usually preferred, but the robust eligibility requirements won’t work for every borrower. However, if an unsecured loan is what you need to achieve your goals, it’s possible to negotiate a compromise that satisfies both parties.
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Themesflat.
Founder & CEO, Arcade Systems
Sed ut perspiciatis unde omnis iste natus voluptatem accusantium doloremque laudantium, totam rem aperiam, eaque ipsa quae ab illo inventore veritatis et quasi architecto beatae
Themesflat.
Founder & CEO, Arcade Systems