What You Need to Know About Business Loans

07 Ago What You Need to Know About Business Loans

Business loans can help you get the money you need to purchase inventory or equipment or finance expansion of your business pay employees and cover merchant cash advance other costs. Before you apply, be sure you are aware of how loans work and what kind of documents you’ll need provide to your lender. Also, be aware of how long the application procedure can take as well as any charges you might incur.

Common uses for business loans

A business loan may allow you to pay for unexpected expenses, such as an injured chair at work or the COVID-19 pandemic. It is also possible to borrow money to fund an unavoidable investment like upgrading or replacing technology, buying manufacturing machinery, or remodeling your store. Some lenders offer credit lines that allow you to draw money as needed. The maximum amount is fixed and the interest is only charged on the amount you draw.

Eligibility requirements and application process

To be eligible for a business loan, you’ll need to provide detailed information regarding your company, such as the official name of your business, tax ID number and financial documents. This could include business plans, proposals and statements of profits and losses and the names and Social Security numbers of those who are owners of 20 percent to 25% or more of your company. Some lenders require that you’ve been in business for a minimum of one year, while other lenders are open to startups or don’t have any time-inbusiness requirements.

A mentor or adviser can guide you through the process of getting a business loan. Organizations like SCORE have a network of volunteers who act as business mentors who provide low- or no-cost advice to small businesses and startup founders. You can find an area chapter and meet an advisor in person.