Your Ultimate Guide To Getting A Loan For Your Small Business

If you're running a small business and looking to grow, cover expenses, or improve cash flow, a business loan can help make that happen. Whether you're just starting or have been operating for years, there are several loan options designed specifically for small businesses. Here's what you need to know to find the right one — and how to qualify without wasting time or money.

What Type Of Business Loan Do You Need?

The first step is to determine which loan type best fits your needs. Not all business loans are created for the same purpose, and each one has different terms, requirements, and use cases.

Term Loans

Best for: Long-term investments, such as equipment, remodelling, or expansion.

• Borrow a fixed amount, repay with interest over a set time (1–10 years).
• Offered by banks, credit unions, and online lenders like Funding Circle and OnDeck.
• Interest rates usually start around 6% for strong applicants.

SBA Loans

Best for: Low rates and long repayment terms.

• Backed by the U.S. Small Business Administration (SBA), but issued by banks or lenders.
• Popular options: SBA 7(a), SBA Microloan, SBA CDC/504.
• Requires solid credit and paperwork, but offers favourable terms (e.g., 10% down, terms up to 25 years).
• Example: Live Oak Bank and Huntington National Bank are top SBA lenders.

Business Lines Of Credit

Best for: Flexible short-term cash needs.

• Access a revolving credit limit — borrow only what you need.
• Great for managing seasonal dips, emergency expenses, or payroll gaps.
• Interest applies only to the amount used.
• Bluevine and Fundbox offer fast, easy-to-qualify lines of credit.

Equipment Financing

Best for: Buying business equipment, machinery, or vehicles.

• The equipment secures the loan (no additional collateral needed).
• The loan term typically matches the equipment's useful life.
• Try lenders like Crest Capital or Balboa Capital.

Invoice Financing / Factoring

Best for: Businesses with unpaid invoices and cash flow issues.

• You sell unpaid invoices to a lender for immediate cash.
• Ideal if clients take 30–90 days to pay.
• Lenders such as altLINE and FundThrough offer invoice financing.

Microloans

Best for: New or tiny businesses that don't need significant funding.

• Loan amounts are typically up to $50,000.
• Offered by nonprofit lenders like Accion Opportunity Fund or Kiva.
• Often easier to qualify, but may come with higher rates.

How To Qualify For A Small Business Loan

Lenders want to see that you can repay the loan. Here’s what they’ll look at — and how you can prepare:

Credit Score

• Personal credit score (FICO) matters, especially if you're a sole proprietor or new business.
• 680+ improves your chances with traditional banks.
• Some online lenders accept scores as low as 600 (or even 500 in some cases).

Time In Business

• Most banks require 2+ years in business.
• Online lenders are more flexible — many accept 6–12 months.

Annual Revenue

• Minimum revenue requirements range from $50,000 to $250,000 per year.
• Lenders use this to assess your repayment ability.

Business Plan & Purpose

• Especially for startups and SBA loans, a clear business plan strengthens your case.
• Be ready to explain how the funds will be used.

Collateral (If Required)

• Some loans require collateral, such as real estate, inventory, or business assets.
• SBA and some online lenders may not require it — or may allow a personal guarantee instead.

Documents You’ll Need

Before applying, gather these documents to speed up the process:

• Government-issued ID
• Business license or articles of incorporation
• Personal and business tax returns (2 years preferred)
• Bank statements (last 3–6 months)
• Profit and loss statement
• Business debt schedule
• Business plan (for SBA or new businesses)

Where To Apply For A Small Business Loan?

Not all lenders offer the same deals — or require the same effort. Here's a breakdown of where to go:

Traditional Banks

• Best for established businesses with good credit.
• Pros: Low interest, trusted institutions.
• Cons: Longer approval times, strict criteria.
• Examples: Wells Fargo, Chase, Bank of America.

Credit Unions

• Member-owned, often more flexible than large banks.
• Pros: Competitive rates, local focus.
• Cons: Limited online tools.
• Example: Navy Federal Credit Union.

Online Lenders

• Best for fast funding or for those with less-than-perfect credit.
• Pros: Easy applications, quick decisions.
• Cons: Higher rates and shorter terms.
• Examples: Lendio (aggregator), Kabbage, OnDeck, Fundera, Bluevine.

Sba Lenders

• Choose from SBA-approved banks or intermediaries.
• SBA’s Lender Match tool can connect you with local options.
• Example: SmartBiz helps streamline SBA loan applications.

Nonprofit And Community Lenders

• Support minority-, women-, or veteran-owned businesses.
• Pros: Smaller loan amounts and a supportive approach.
• Examples: Accion Opportunity Fund, LiftFund, CDC Small Business Finance.

How To Choose The Right Loan?

There’s no single best loan — it depends on what you’re using it for and what you qualify for. Ask yourself:

• Do I need a lump sum or flexible access to cash?
• Can I meet the credit and revenue requirements?
• Am I comfortable putting up collateral?
• How soon do I need the funds?

Then compare based on:

• Interest rate and APR
• Repayment term
• Total cost of the loan
• Fees (origination, late payment, prepayment penalties)
• Funding speed

For example, if speed matters more than cost, an online loan may be worth the higher rate. If you’re buying equipment, a secured equipment loan could be cheaper than using a general-purpose loan.

Tips To Improve Approval Odds

Minor tweaks can make a big difference when applying:

• Improve credit: Pay off existing debt, fix errors, and reduce credit utilisation.
• Increase revenue: Even a slight boost in monthly revenue can expand your loan options.
• Separate finances: Keep personal and business accounts apart to show financial professionalism.
• Update your business plan: Especially for SBA loans, a well-prepared plan builds lender confidence.
• Apply through marketplaces: Sites like Lendio, Fundera, or Nav let you compare multiple offers in one place.

What To Watch Out For

Some loans look appealing at first, but come with fine print that could cost you:

• High APRs: Online lenders may advertise “rates starting at X%,” but real APRs could be 25%+ depending on your credit.
• Daily or weekly repayments: Can strain cash flow if you’re not prepared.
• Prepayment penalties: Avoid lenders that charge fees for early payoff.
• Hidden fees: Ask for a full cost breakdown.

Final Thoughts: Taking The Next Step

To get a small business loan, know how much you need, check your credit, and choose lenders that match your goals. Gather documents in advance and compare offers based on total cost and repayment terms, not just interest rates. Use platforms like Lendio or SmartBiz to simplify the process. The right loan can help your business grow—make sure it fits your needs and cash flow.