How Much Of a Small Business Loan Can I Get USA 2021
How Much Of a Small Business Loan Can I Get ?
It is always the question in the borrower’s mind, how much of a small business loan they can get and what is the method to get a big loan amount? Well, We understand the loan process can be a bit complex and involve a lot of paperwork. Especially the process of getting a small business loan can be much more frustrating as you will be judged on every single decision you had made in your personal and professional life.
The borrower has the faintest idea of what to expect next when applying for a small business loan. It only increases the tension and leads towards running forth and back to make things happen. If a borrower knows in advance what to expect and what are the steps in getting a small business loan of their desired amount then you should read this article.
Today, we are discussing what a small business owner should expect to get a small business loan and how to make sure to get the desired amount of small business loan. This will do two things for you- release your frustration and replace it with measures you need to take to get a small business loan and proper planning and management of the small business loan process will increase the chances of approval.
Steps To Get The Small Business Loan USA 2021
There are mainly 5 steps to get approval on your small business loan application. We would like you to follow these steps carefully and make yourself an appealing small business loan candidate in front of loan officers. So let’s start how to get a small business loan.
Step 1- Check Your Qualification For The Small Business Loan
Every business owner must do a detailed self-evaluation before applying for a small business loan. It is the crucial step that will determine if you are eligible for a small business loan or not and how much small business loan you can get? To know the answer to these questions you must ask some other important question yourself first.
- ANALYSE YOUR CREDIT SCORE
The minimum threshold of credit score to get a small business loan from a bank is 680 FICO score or above. Banks don’t approve the loans below this credit score then you just might look for microloans or small business loans with bad credit options.
If you are not aware of your current credit score then you can get the free credit report from several credit bureaus before you apply for a small business loan. Credit bureaus like Equifax, Experian, and TransUnion will help you to know your current credit score.
- AGE OF YOUR SMALL BUSINESS
It is a very important factor and can affect your small business loan plans. A borrower must be operating his/her business for a minimum of 2 years to get approval from a bank and for at least 1 year to apply for an online small business loan lender.
- EARNING AND REPAYMENT CAPABILITY
Another deciding factor from the lender’s point of view is your annual nest worth. Lenders would want to know exactly how much your small business earns after paying off all the expenses. If you fall between $50,000 to $250,000 then you are fine. You can apply for a small business loan wherever you want. Therefore you must calculate your annual net worth.
A borrower also needs to analyze his/her repayment capacity as the lender would. A borrower needs to make sure that their net worth is more than their expenses monthly and can repay the loan amount comfortably. Ideally, your earnings should 1.25 times your total expenses including your loan repayment amount.
Small business loans are mainly of two types secured and unsecured loans. A secured small business loan required an asset as collateral against your loan and unsecured loans don’t need anything. The rate of interest also varies secured business loans are much cheaper than unsecured loans.
Putting your valuable asset can be risky but only if you fail in your repayment terms. Business collateral can improve your chances of getting a loan of a higher amount. Lenders like a bank can seize your asset if you failed in your loan repayment and you have to personally pay off the unsecured loans if your business doesn’t pan out as you have expected.
Deeply analyze all the above factors if you want to go to the next step to get a small business loan.
Step 2- Select The Best Small Business Loan Type You Need
The borrower must decide what kind of small business loan they needed to fulfill their requirements. All the lenders will ask you about the small business loan type you need and your answer will determine your loan type.
- If you need a small business loan for a start-up or it’s only the first year of your business and you need the loan for running smooth operations then you can rely on startup financing then you should consider business credit cards and personal loans.
- If you are looking for a small business loan as working capital or to manage your day-to-day expenses then you should opt for a business line of credit or working capital loans that can cover your daily expenses and manage the cash flow.
- If you are looking for expansion then traditional small business loans can help you like SBA loans or term loans which can offer you a higher small business loan amount and that can go up to $5million.
Step 3- Vet Your Options
Before applying for a small business loan you must vet all your options and then make your decision every lender has some conditions and every small business loan come with pros and cons.
If you don’t fulfill any of these conditions then you should consider online or private money lenders for a small business loan. Small business loans from the traditional lenders are cheaper but they come are more stringent and come with a lot of paperwork.
- You must have an asset to offer as a collateral
- You must devote a reasonable time to your business every day
- You must wait for a longer period to get the loans from the bank
If you lack any criteria or simply need an urgent loan then online lenders are your best choice. They can provide you the loan within 12 hours as well.
Step 4- Prepare Your Loan Documents
If you want a loan from traditional banks such as term loans, lines of credit, and commercial mortgages or refinancing then you must fulfill these document requirements.
You need to submit a combination of these documents depends on the lender’s requirement:
- Business and personal tax returns
- Business and personal bank statements
- Business financial statements
- Business legal documents such as articles of incorporation, commercial lease, franchise agreement, etc.
- Business plan
Step 5- Apply For a Small Business Loan
Now the last and most important step for which you have gone through all the above steps. We are sure until now you have made up your mind of how much small business loan you can get and from where you can get your desired amount that will not harm you or your business in any way.
It is time to apply for a small business loan. We are sure now you are feeling more comfortable as now you have all the clarity in your mind. Your decision of choosing the moneylender must depend on the flexible and long repayment terms and a lower rate of interest.