For some companies looking to get a business loan, it can be confusing trying to figure out where to start. You probably also have numerous questions regarding the loan process. Business loans aren’t as difficult to get as some people think. It’s about being prepared, having your documentation in order, and asking the right questions. Below, we answer some commonly asked questions regarding business loans and how to get them.
Can I qualify with less-than-ideal credit?
There is no yes or no answer here. Generally speaking, you are going to want to talk to the lender and find out about their qualification criteria. If they are quite stringent when it comes to credit scores, then you may want to look elsewhere. Oftentimes, alternative or online lenders will be more flexible when it comes to things such as credit score. They tend to weigh more elements, and thus a single number or score will not necessarily disqualify you from getting business loans. Also, keep in mind the type of loan for which you are applying. For example, if you have a lower credit score, you might want to look into a merchant cash advance versus other types of financing. In the meantime, start doing what you can to improve your current credit status. Try to pay down some debt. Make sure you remit all payments promptly. The more you can do before applying for a business loan, your chances are better.
Can a startup business get a loan?
While many lenders do like to see a certain amount of time that a business has been in operation, there are various startup loans and business loan programs explicitly designed to help newer businesses. Keep in mind, that if you are applying for business loans geared toward startups, the lender is going to be more focused on your financial data and credit score. So you want to make sure that is where it needs to be.
What can I use a business loan for?
The great thing about working with online lenders is that you can use your business loan for anything you need related to your company. So for instance, let’s say you want to invest in a new office space or build out your current office space, your business loan can be applied to this project. You can also use business loans for marketing purposes, hiring personnel, or launching new products. Many companies actually take the proceeds from their loan and use them to help boost cash flow during slower times. The flexibility is most definitely there when working with alternative and online lenders. Other lender types, however, may not be quite so flexible. So you want to look into any terms and stipulations before signing on the dotted line.
What determines business loan interest rates?
The question of interest rates is certainly in the minds of many business owners. After all, you don’t want to be paying a fortune for the money you are borrowing. The answer here is, it depends. Beyond the prevailing interest rate of the time, interest rates are going to be affected by a number of factors including type of loan, lender, and a company’s overall application. That is to say, your credit score, number of years in business, industry type, and loan amount will all go into determining what interest rate you will pay.
How quickly do business loans get processed?
Again, this is an “it depends“ question. When working with a bank, loan processing can take weeks if not months. And if it is an SBA loan, it can take even longer. Whereas if you work with an alternative lender, the process goes a lot faster. Most companies will receive a decision the same day they apply. And the money will hit their account within just a couple of days. This is why more and more small businesses are in fact turning to online and alternative lenders for business loans.
What documentation is required for a business loan?
As mentioned earlier, the more prepared you are and the more organized your documentation, the better the process will go for you. To this end, you want to ensure that you understand what the lender is asking of you regarding the required information and documents. Among some of the more commonly requested documentation: tax returns, both business and personal, bank statements, financial statements to include balance sheets, cash flow statements, and profit and loss statements, any business leases, articles of incorporation, and it also helps to have a business plan to submit as well.
How is loan repayment determined?
This will be based upon the type of loan for which you apply. Prior to the loan being funded, you will have all the information beforehand regarding repayment terms. So whether you pay weekly or monthly, the interest rate, and the actual payment amount, will be disclosed before you accept the loan and receive your funds.
Are automatic payments possible for business loans?
Yes, it is very often the case that ACH payments from a business bank account are acceptable for a business loan. That said, if for some reason you cannot do ACH payments, then there are likely going to be other options for your business to pay back the loan.
First Union Lending is Here for You
We want to help small businesses thrive and ultimately grow. This is why we do what we do. With short-term loans, merchant cash advances, and equipment financing, among other loan types, we have a solution to fit your specific business needs. There is no off-the-shelf approach with us. Our representatives walk you through the process every step of the way. Call today and let’s get started.