Business loans can provide the money you need to purchase inventory or equipment, finance business expansion or pay employees, and also cover other expenses. Before you apply, make sure you know how these loans work and what kind of documents you’ll need provide to your lender. Also, be aware of how long the application process could take and the charges you might incur.
Common uses of business loans
A business loan could help you pay for unexpected expenses like a damaged chair at work or the COVID-19 pandemic. In addition, you may require borrowing money to cover an unavoidable capital expenditure, like upgrading or replacing technology, buying manufacturing equipment or renovating a retail store. Some lenders offer credit lines that permit you to draw money when needed. The maximum amount is set and interest only accrues on the amount that is drawn.
Application process and eligibility requirements
To be eligible for a business loan, you typically need to provide specific details about your company, including the official business name as well as the tax ID number. financial documentation. These could include business plans, proposals and profit and loss statements and the names and Social Security numbers of those who hold 20% to 25 percent or more of your business. Some lenders require you to be in business for at least one year. Others accept startups, or do not have any time-frame requirements.
A mentor or advisor can guide you through the process of getting a business loan. SCORE, for example, has a network of business mentors who offer free or low-cost assistance to founders of startups and small businesses. You can find a local chapter and talk to an advisor in person.