Business loans can provide the cash you need to purchase equipment or inventory for business expansion, finance business expansion pay employees and cover other costs. Before you apply, be sure you know how these loans work and what kind of documentation you’ll need to provide to your lender. Be aware of the time it can take to submit an application as well as any fees that may be charged.
Common uses of business loans
A business loan can allow you to pay for unexpected expenses, such as a damaged chair at work or the COVID-19 Pandemic. Alternatively, you might require borrowing money to cover an unavoidable capital expenditure, such as upgrading or replacing technology, purchasing equipment for manufacturing or re-designing a retail shop. Some lenders offer lines of credit that allow you to draw money according to your needs, with a set maximum and interest only charged on the amount that is used.
Application process and eligibility requirements
You will be required to provide specific information about your company, such as the official name of your company, its tax ID number and any financial records. These could include business plans, proposals, and profit and loss statements, as well as the names and Social Security numbers of those who own 20% to 25 percent or more of your company. Some lenders require that you be in business for at minimum for a year. Some lenders will consider startups, or do not have time-frame requirements.
A mentor or adviser can guide you through the business loan process. Organizations like SCORE have an extensive network of business mentors who offer low- or no-cost advice to small businesses and startup founders. You can search for an area-based chapter to meet with an advisor in person.
