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Best Small Business Loans

If your looking to acquire a business loan then continue reading this article to help you find the best way to obtain a business loan. Your business insurance covers you against the unexpected costs associated with running a business. If you don’t have the right insurance, you could lose your business due to lawsuits, natural catastrophes, or accidents.

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What is a Small Business Loan?

Entrepreneurs can use small business loans to help them build, expand or maintain their businesses. You don’t have to go to a bank to get a loan for your business. There are many online lenders that can help you, with less paperwork and quicker approvals.

The U.S. Small Business Administration (SBA), estimates that 32.5 million small businesses are located in the United States. Although each business is unique, they all share one thing: the need to finance their businesses.

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How to get a Small Business Loan

The requirements for small business loans vary depending on what type of loan you are looking for. The paperwork required for short-term loans is typically less than that for long-term loans. Equipment financing, on the other hand, usually requires less documentation than a line of credit. To increase your chances of approval, it is a good idea still to have certain documents on hand in case they are requested.

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Small Business Loan Application Checklist

Once your company is able to take out a loan, it’s time to start the process of gathering the documentation required for your loan application. Although the exact documentation will vary between business funding partners, it will likely include the following documents.

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What do Small Business Lenders Look for?

Lenders for small businesses want to see that your credit history and business are stable. To assess your risk as a borrower, lenders will look at a variety of debt, asset and credit factors.

• TIME IN BUSINESS

  A business that has been in existence for at least two years is generally more stable than one that has just started. Lenders understand this and are more likely to lend to a business with a track record of revenue over two years than one that has had little or no revenue for six months.

• CREDIT SCORE

  Credit scores are a data point that lenders use to assess your reliability as a borrower. For most loans, you will need to have a credit score of 600 or higher. However, some lenders and loan types may allow scores as low at 500.

• CASH FLOW

  A cash-flow projection is a way to see when money has been collected, what cash is left and when it goes out. Lenders want to know that the borrower is well-versed in the financial cycle of the business.

• COLLATERAL

  If you are unable to make your payments, lenders can legally seize collateral. This includes company buildings, equipment, and accounts receivables. Many business owners use their personal assets, including their homes, as collateral for a loan.

• DEBT – TO-EQUITY RATE

  The debt-to-equity ratio (D/E), which measures your company’s debt to equity, is the percentage of your company’s total debt divided by the shareholders’ equity. Based on your existing debt, this metric allows lenders to determine how likely you will be to pay off new debt. High D/E’s can be common in certain industries. However, you should aim to keep your company’s D/E as low as possible.

• WORKING CAPITAL

  Your company’s working capital is the amount of money that you have available to finance its day-to-day operations. Your working capital can be calculated by subtracting the debt liabilities of your business within one year from any current assets you have that you can convert into cash.