What You Need to Know About Business Loans
Business loans can help you get the money to expand your business, pay employees, and cover other costs. Before you apply, be sure you know how these loans work and what kind of documents you’ll need to provide to your lender. Be aware of the time required to complete your application, as well as any fees that may be assessed.
Common uses for business loans
A business loan can help pay for unexpected expenses, like the damage to your office chair or the COVID-19 pandemic. You might also need to borrow money to pay for an expense that is unavoidable such as upgrading or replacing technology, buying machinery for manufacturing, or even remodeling the store. Some lenders offer lines of credit which allow you to borrow funds as needed with a predetermined maximum and interest only charged on the amount utilized.
Eligibility requirements and application process
You will be required to provide specific information about your company, such as the official name of your company and its tax ID number as well as any financial documents. This might include business plans, proposals, and statements of profits and losses, as well as the names and Social Security numbers of those who hold 20% to 25% or more of your company. Some lenders require that you’ve been in business for at least one year, while others allow startups and do not have any time-in business requirements.
It is helpful to have a mentor or advisor to help you navigate the process of getting a business loan. SCORE, for example, has a network of business mentors who provide advice for free or at a low cost for entrepreneurs who are starting their own businesses. Find local chapters and meet an advisor in person.