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Vital Tips For Applying For Small Business Loans Online
Like most small business owners, there will come a time when you need financing to support your business goals. You might be a startup, ready to expand your operations, or on pace to purchase your own building.
The key to your success is preparation and understanding the loan options available to you today. Below is a brief overview of how to apply for small business loans online and in-person along with the major funding platforms to consider.
Before Applying For A Business Loan
There are three critical steps to take before applying for a business loan:
- Create A Business Plan – A business plan guides your strategic planning and sets the tone for your marketing objectives. Your business plan provides potential lenders with the critical information they need when considering your application. If you do not know how to write a business plan, there are many helpful resources available online.
- Look Up Your Credit Score – Whether you seek a traditional or online small business loan, you need to know your credit score before applying. This will protect you from a surprise rejection. It might be better to improve your credit score before applying for a loan.
- Prepare Your Documents – Make a point to find out ahead of time exactly what your chosen lender requires. Prepare your documents in the order requested, making sure to have all proofs and supporting statements. This will improve your chances of a favorable outcome.
How to Choose the Right Lender
There are three primary resources for accessing small business loans: banks, the Small Business Administration (SBA), and online lenders. Which option you choose depends on your goals, financing needs, and fiscal health.
Traditional Banks
Banks offer traditional small business loans, lines of credit, and mortgages to purchase commercial property. Banks often offer larger loan packages and more favorable repayment periods. Still, your business credit rating needs to be excellent and you must be able to offer collateral.
Banking lending decisions tend to match the economic climate. If there is positive economic growth, your application is more likely to be approved if you meet all the conditions.
You can apply for small business loans online from a bank, but to complete the process, an in-person meeting is normally required. From start to finish, the entire process can take 1-3 months, but if you can wait, a bank can be a good option because they typically offer the lowest APR terms.
SBA Loans
SBA loans are guaranteed by the Federal Government and issued by private lenders that are partnered with the SBA. Loan packages include disaster loans, 7(a) loans, and short-term microloans.
Loans guaranteed by the SBA range in size from $50,000 to $5.5 million and can be used for operating capital, purchasing fixed assets, and many other business purposes.
To be eligible, your small business must meet certain size requirements, have a sound business purpose, and be able to demonstrate its ability to repay the loan.
Your credit rating does not need to be excellent and even if you are a startup, you might be eligible for a loan.
Online Lenders
Some of the best small business loans online can be accessed from digital lending platforms. Small businesses rejected by banks because of their credit score are eligible to apply, and the eligibility requirements are much less onerous.
The application process is also fairly straightforward and easy to complete. Everything is done online, which means you do not lose precious time from your business day.
On average, you will have a response within 24 hours. If you need the cash now, an online lender is the best option.
The average APR is higher than a bank lender and the loan repayment period is shorter. Monthly payments are deducted directly from your account, leaving you with less cash-flow flexibility.
How to Apply for Small Business Loans
How to Apply for Bank Loans
- Check your credit score and find a lender that offers small business loans for your credit score bracket.
- Organize your documents, including your tax returns, business license, balance sheets, and bank statements.
- Make an appointment with the loan officer at the bank you select.
How to Apply for SBA Loans
- You must apply through one of the partner lending agencies.
- A list of the best small business loan lenders that partner with the SBA can be accessed from their website.
- Partner lending institutions will direct you to the best loan package for your small business needs and will provide you with a list of all documentation required.
How to Apply for Online Loans
- Go online and compare alternative lenders.
- Shop around for the best interest rates and repayment terms.
- Submit an online application.
Conclusion
The good news is that you have many options available to help you find the best small business loan lenders in today’s marketplace. The platform you ultimately choose depends on your unique situation and financing needs. In all cases, preparation is the key ingredient to your recipe for success.
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