Business loans can give you the capital you need to purchase equipment or inventory or finance expansion of your business as well as pay employees and pay other expenses. Before applying, make sure you understand how these loans work and what type of documentation you’ll need to provide to your lender. Also, be aware of how long the process can take and any fees you could incur.
Common uses for business loans
A business loan could help you pay for unexpected expenses, like an office chair that is damaged or the COVID-19 pandemic. In addition, you may require borrowing money to cover an unavoidable capital expenditure, like upgrading or replacing technology, purchasing equipment for manufacturing or renovating a retail store. Some lenders offer lines of credit which allow you to borrow funds whenever you need it and with a limit and interest charged only on the amount utilized.
Application process and eligibility requirements
You’ll have to provide complete information regarding your business including the official name of your business, its tax ID number as well as any financial documents. This could include business plans or proposals, as well as statements of profit and loss and the names and Social Security Numbers of those who control 20-25 percent or more of the company. Some lenders require that you’ve been in business for a minimum of one year, while some allow startups and do not have any time-in business requirements.
A mentor or advisor can help you navigate the business loan process. SCORE is a good example. It has a network of business mentors who provide advice for free or at a low cost for entrepreneurs who are starting their own companies. You can look up a local chapter to meet with an advisor in person.