Business loans can provide the funds needed to expand your business as well as pay employees and cover other costs. Before you apply, be sure you are aware of how loans work and what kind of documentation you’ll need to submit to your lender. Be aware of the amount of time it can take how do student credit cards work to complete an application and any fees that may be assessed.
Common uses for business loans
A business loan can be used to cover unexpected expenses, like the damage to your office chair or the COVID-19 pandemic. Alternatively, you might need to borrow funds to cover an unexpected capital expenditure, like replacing or upgrading technology, buying manufacturing equipment or remodeling a retail store. Some lenders offer credit lines that allow you to draw funds according to the need. The maximum amount is set and interest only accrues on the amount drained.
Eligibility requirements and application process
To qualify for a business loan, you’ll typically need to provide specific information regarding your company, such as the name of your company along with the tax ID number and financial documents. This could include business plans or proposals, as well as profit and loss statements and the names and Social Security Numbers of those who hold 20-25 percent or more of your company. Some lenders require that you’ve been in business for at least one year, while other lenders accept startups or don’t have any time-inbusiness requirements.
It can be helpful to have a guide or mentor to help you navigate the business loan process. SCORE is one example. has a network of business mentors who offer free or low-cost assistance to entrepreneurs in the early stages and small companies. You can locate an area chapter and meet an advisor in person.