All About Getting a First-Time Business Loan
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How Do You Apply for a First-Time Business Loan?
Checking Your Credit Score
Figuring Out How Much Money to Apply For
Debt-Service Coverage Ratio (DSCR) and How to Calculate It
Business licenses and registration Commercial lease agreement Business plan Up to one year of business bank statements Personal and business tax returns from the most recent three years Business financial statements List of current accounts receivable Schedule of business debts Proof of collateral
Types of First-Time Business Loans
7(a) loans The most common SBA loan, 7(a) loans can be an ideal option for business financing due to their long repayment terms and low interest rates. Plus, 7(a) loans can be used for a variety of purposes, including working capital, business expansions, or purchasing equipment and supplies. The maximum loan is $5 million. 504 loans These SBA loans offer affordable financing for large equipment or real estate-related purchases. Terms can be as long as 25 years with maximum loan amounts up to $5.5 million. Microloans These small loans (up to $50,000) are targeted specifically to startups. The SBA microloan program is fully funded by the SBA and administered by an intermediary network of nonprofit community-based lenders, rather than traditional banks. Disaster loans These low-interest loans provide up to $2 million to assist small businesses that have been negatively impacted by a declared disaster.
Business Acquisition Loans
Alternatives to First-Time Small Business Loans
Personal loans for business These are traditional loans that you may be able to get as an individual. Not all lenders will allow you to use a personal loan for business use, so it’s important to check before you apply. And note that, while paying your installments promptly for a personal loan may help your personal credit, it won’t help your business establish an independent credit history. Crowdfunding For this funding option, you set a monetary goal and create a marketing campaign to solicit funds online through a crowdfunding site. With rewards-based crowdfunding, people contribute to your project or business and get a gift or reward in return. Crowdfunding can help you raise excitement about your business and test the waters to see how interested people are in your idea. However, it can take a fair amount of time and effort to run a successful crowdfunding campaign. Loans from family and friends Supportive friends and family members may be willing to loan you small amounts of money to help you get your business up and running. If you go this route, it can be a good idea to write up a promissory note so the amount of the loan and terms of repayment are clear, and there are no misunderstandings that could jeopardize your relationship.
Comparing Loan Options
Frequently Asked Questions
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