Business loans can provide you with the money to finance expansion or pay employees, as well as cover other costs. Before applying, make certain to know how these loans operate and what documentation you’ll need to submit to your lender. Also, be aware of how long the application process could take and the costs you may be charged.
Common uses of business loans
A business loan can help cover unexpected expenses, such as a damaged office chair or the COVID-19 pandemic. You may also need to borrow money to pay for an unavoidable investment for example, upgrading or replacing technology, buying machinery for manufacturing, or even remodeling a store. Some lenders provide credit lines that allow you to draw money according to the need. The maximum amount is set and the interest is only charged on the amount drained.
Application process and eligibility requirements
You will be required to provide specific information regarding your business including the official name of your company as well as its tax ID number and any financial records. This could include business plans including proposals, statements of profit and loss and the names and Social Security Numbers of those who are owners of 20 to 25 percent or more of your firm. Some lenders require that you be in business for at least one year. Some lenders will consider startups, or do not have time-frame requirements.
It can be beneficial to get a mentor or an adviser to help you navigate the process of getting a business loan. SCORE, for example, has a network of business mentors who offer no-cost or low-cost guidance to entrepreneurs in the early stages and small businesses. You can find local chapters to meet with an advisor in person.