Business loans can give you the cash you need to purchase inventory or equipment, finance business expansion pay employees and cover other costs. Before applying, make sure to understand how these loans operate and what paperwork you’ll need to your lender. Also, be aware of how long the application process could take and the fees you may incur.
Common uses for business loans
A business loan can help you pay for unexpected expenses such as a damaged chair at work or the COVID-19 pandemic. It is also possible to borrow funds to finance an unavoidable expense such as upgrading or replacing technology, buying machinery for manufacturing, or even remodeling the store. Some lenders offer credit lines that allow you to draw funds according to the need. The maximum amount can be set, and interest only accrues on the amount drawn.
Application process and eligibility requirements
You will have to provide complete information about your company, such as the official name of your business, its tax ID number and any financial records. This could include business plans or proposals, as well as profit and loss statements and the names and Social Security Numbers of those who are owners of 20-25 percent or more of the company. Some lenders require that you be in business for at minimum for a year. Some lenders will consider startups, or do not have deadlines.
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 no-cost or low-cost guidance to founders of startups and small companies. Find an area chapter and meet an advisor in person.
