What is the easiest business loan to get?
The answer to this question depends on how much you need and how you intend to use the funds. There are many lenders that have minimal qualification requirements for annual revenue, time in business and the personal credit score of the business owner. This is helpful for startups without a financial history that cannot meet the requirement lenders have for more established organizations. Be sure to read our reviews to see which lenders have less-onerous eligibility requirements.
Do startup business loans require personal guarantees?
If the loan you're considering is unsecured (no collateral is required), more often than not, you're going to need to provide a personal guarantee. This is the case for most startup loans because this is how lenders protect themselves if you're unable to repay the loan.
Will lenders look at my personal credit?
If you are starting a new business, there isn't a financial history for your company. Rather than evaluate your business's credit, lenders check your personal credit. This is common, especially if you are a new business owner. Sometimes looking into your personal credit is the only option lenders have.
How important is your credit profile when applying for a small business loan?
Your credit profile has a significant impact on whether you'll be approved for a small business loan. Unless your business has been around long enough to establish solid credit, lenders look at your personal credit profile to assess your creditworthiness. The higher your credit score, the better.
Many lenders also require collateral to underwrite the loan. It could be your home, car or other private property of value. If your business fails to pay back the loan, the lender can come after that collateral.
What credit score do I need to qualify for a small business loan?
The minimum credit score you need to qualify for a loan ranges from 620 to 640 or more. However, the requirements are based on the type of SBA program you're seeking and your lender. For an SBA 7(a) loan or SBA 7(a) express loan, borrowers should have a score of 640 or more. If you're interested in the SBA CAPLines program or an SBA export loan, you should have a credit score of at least 660. SBA CDC/504 loans require a minimum score of 680, and for an SBA microloan, a score of 620 to 640 is preferred.
Online lenders often have more flexible requirements. Some provide loans to businesses with credit scores between 500 and 550. However, if your credit score is that low, you will likely pay higher interest rates.
Can you get a business loan if you have bad credit?
It can be hard, but it's not impossible. There are lenders who don't use your credit score as a determining factor in whether you qualify for a business loan or not. Some weigh your financial history and business success more than your credit score.
If your credit score isn't great, shore up other parts of your business lenders value, such as revenue or sales.
Does applying for a business loan affect your personal credit score?
Often, to be approved for a small business loan, you must personally guarantee the debt, meaning you will pay back the loan yourself if your company doesn't. The lender has every right to go after you individually if the loan is delinquent, and that could hurt your personal credit score. The same applies to a business line of credit. If you personally guarantee any loan and the business is unable to pay it, you are on the hook for it.
What documentation is required to get a business loan?
Among the documents you will need to provide lenders are your annual business revenue and profit, bank statements, personal and business tax returns, a business plan, business licenses and permits, proof of collateral, a balance sheet, a copy of your commercial lease, and any legal contracts and agreements you already have in place.
What is the fastest and easiest way to get a business loan?
The traditional way of borrowing money has long been to tap a local bank or credit union, but this route can take weeks before your business is approved and funded. Online lenders tend to do a better job in this regard, getting loans into business owners' hands in days.
Alternative lenders typically offer several loan options, including working capital loans, merchant cash advances, equipment financing, term loans and invoice factoring. Depending on the type of loan you choose, you could have money in your bank account in less than 24 hours.
Either way you go, you can speed up the entire approval process by having your business documentation ready, including tax forms, bank statements, financials and other documents related to your enterprise.
What assets can be used to secure a business loan?
Lenders vary in the collateral they'll accept, but in general, anything with value can be used. Common types of collateral for business loans are equipment, vehicles, real estate, inventory and accounts receivables.
Some lenders may require you to offer personal collateral not tied to your business. This could include vehicles, real estate and cash in the bank.
What are typical business loan terms?
There are several types of business loans, all with varying terms. Business loan terms can be as short as a few weeks or as long as 25 years.
A traditional bank loan has terms from three to 10 years. Medium-term business loans last one to five years, while short-term business loans are typically three to 18 months in length.
SBA small business loans have terms up to 25 years, but 10-year loans are more common.
What payback terms can you get for your merchant cash advance?
A merchant cash advance gives you quick access to the money from your credit card sales. However, it's a costly and risky way to access cash, with complicated terms.
With a merchant cash advance, you get an upfront payout and pay it back with a percentage of your future credit card and debit card sales, or you can make daily or weekly fixed payments. Either way, you make payments plus fees and interest until you've paid back the advance. The lender assesses how likely and able you are to pay back the advance, which impacts the fees you'll pay; your riskiness to the lender is known as the factor rate. The higher your factor rate (i.e., the greater risk the lender determines you to be), the more fees you're on the hook for.