Business loans can provide you with the funds to finance expansion or pay employees, as well as cover other costs. Before you apply, make sure you know how these loans work and what type of documentation you’ll have to provide to your lender. Also, be aware of how long the application process can take and any fees you could incur.
Common uses of business loans
A business loan could allow you to pay for unexpected expenses, such as a damaged chair at work or the COVID-19 Pandemic. You may also need to borrow money to pay for an unavoidable expense like upgrading or replacing technology, buying machinery for manufacturing, or even remodeling the store. Some lenders provide credit lines that allow you to draw funds in the event of need. The maximum amount is determined and interest is charged only on the amount drawn.
The application process and eligibility requirements
To be eligible for a business loan, you’ll typically need to provide detailed information about your company, which includes the official name of the business as well as the tax ID number. financial documents. This could include business plans such as proposals, statements of profits and losses, as well as the names and Social Security Numbers of those who control 20-25 percent or more of the company. Some lenders require that you have been in business for at least one year, while others will accept startups, or do not have any time-in-business requirements.
A mentor or advisor can help you navigate the process of getting a business loan. SCORE for instance, has a network of business mentors who offer no-cost or low-cost guidance to startup founders and small businesses. You can find local chapters and meet an advisor in person.