Business loans can help you get the money to expand your business, pay employees, and pay for other expenses. Before you apply, be certain to know how these loans operate and what paperwork you will need to provide to your lender. Be aware of how long the process can take and any charges you might incur.
Common uses for business loans
A business loan could help you pay for unexpected expenses, such as an office chair that is damaged or the COVID-19 pandemic. You may also require borrowing funds to cover an unavoidable capital expense, like replacing or upgrading technology, purchasing equipment for manufacturing or renovating a retail store. Some lenders offer credit lines that allow you to draw funds in the event of need. The maximum amount is set and interest only accrues on the amount that is drawn.
Eligibility requirements and application process
You will have to provide precise information about your company including the official name of your company along with its tax ID, and any financial documents. This may include business plans, proposals, and profit and loss statements as well as the names and Social Security numbers of those who hold 20 percent to 25% or more of your company. Some lenders require you to be in business for at minimum for a year. Some lenders will consider startups, or do not have any time limits.
It can be helpful to have a mentor or adviser to guide you through the process of obtaining a business loan. SCORE is a good example. It has an extensive network of business mentors that provide free or low-cost advice to entrepreneurs in the early stages and small companies. It is possible to search for local chapters to meet with an advisor in person.