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How to get a business loan for a small business

Getting a loan for a small business is a hurdle faced by many of the aspiring entrepreneurs largely due to strict loan standards of the bank. Making necessary arrangements for external financing is very necessary when you are about to kickstart your business. There are a large number of alternative lenders who provide small business loans. It does not only support to grow and fund new research and development but is also a valuable cover to rely on to meet day to day expenses, including inventory and liability. There is a lot more than it could be helpful. For example, it could be used to extend new businesses, promote sales and marketing and even lend a hand to hire new people for your business.

However, finding a convenient bank, applying for and getting sanctioned for your business loan is quite a tough journey. The more you are prepared, the better. Here are few options that you should consider before considering getting a small business loan.

  • Credit Unions
    Credit unions offer a range of credit loans for members to raise businesses. Generally, they lend money only for the union members, certain unions may accept applications from new members but some insist on saving with the union for a set period of time before being eligible to borrow money. If you are seeking for a larger amount of loan, credit unions can grant smaller amounts than a bank which is much similar to the amount lent by payday stake man. Credit unions can also offer secured loans for a larger amount and longer repayable terms, levying competitive and very fewer interest rates, as they are nonprofit firms, but the allotted APR by the law is 42.6%, which is significantly lesser than other short-term loans.
  • Banks
    Banks are always better options for borrowing a larger amount of money for a lesser interest rate to get finance to fuel your business. They may even extend your repayment terms if you stand in need of. This might sound fetching but it also includes risks. You will not be granted the money unless you pledge collateral for repayment of the loan which can be hard to secure. Loan sanction process and approval can be intimidating as you may have to fill in a slew of forms and paperwork which would possibly make you wait a few months to see any money. Though banks sanction small business loans, the very popular and bigger banks are still approving only 21% of requests today.
  • Online direct lenders
    Small business entrepreneurs who have trouble getting loans through traditional methods have a lot of options online. Online direct lenders evaluate and insure your application for the loan, and if you are eligible, they would provide you with loans under terms and conditions. It is important to note that you approach only state-licensed lenders who operate the business in your state residence, and they follow up with all federal and state lending rules and standing orders. The advantage that normally attracts customers is the speed in process and less time intensive on applications. Most lenders can get you your money less than a week or two. But the major disadvantage would be their higher rate of interest. Similar to traditional banking you may have to personally guarantee the loan taken with your collateral, which could be at risk if you default.

How to pick the best business loan?
You may be still looking for a lower interest rate, apparent terms and repayment schedule and a streamlined application process. Here are some factors to look for when picking the best business loan.

  • High loan amounts
    Choose the channel that provides high loan amount. Online direct lenders don’t offer a fairly large seven figure amounts as a loan that a bank can provide. Yet the best lenders still offer loan of six figures so that small business entrepreneurs can get the cash needed.
  • Genuine eligibility requirements
    Be it a bank, credit union or an online lender all three will cast about for strict loan eligibility requirements. Though lenders employ effective and quick working methods to process your application, it is daunting to start filing an application only to find that you don’t meet the minimum eligibility requirements.
  • Flexible terms
    Banks loans provide fewer interest rates for lengthy terms which will not be offered by online lenders. Choose the one that provides flexible terms preferably up to 4 to 5 years. Similarly, you get to have more repayment options like weekly, fortnightly or monthly payment.
  • Reputation
    The reputation of the organization is the first thing to consider. Because good reputation generates trust. Online lenders are still relatively a new phenomenon. As per the significant reviews state, an approved organization can be a good option too.
  • Transparent organization
    It is the basic rule to get to know the rules and regulations of the bank or where ever you borrow the money from. If you unknowingly skip repayments, you might be at risk later on. A transparent financial organization will have extensive FAQs and clearly detail of the borrowing, including extra fees and possible interest rates.
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