How to Get a Loan for a Business: Helpful Tips to Get Approved

Starting a business costs money. You might need funds for equipment, inventory, or rent. But figuring out how to get a loan for a business can feel tricky and overwhelming.

There are many ways to get small-business loans. For example, the U.S. Small Business Administration (SBA) helps businesses secure capital by reducing the risk banks face when lending.

This makes it easier to get the money you need.

This guide will walk you through everything step by step. You’ll learn where to apply, what documents you’ll need, and tips to improve your chances of approval.

Understand Your Business Financing Needs

Figure out exactly why you need money for your business. Think carefully about the amount and type of funding that fits your goals.

Determine Why You Need the Loan

Think about the purpose of your loan. Do you need cash for working capital, like payroll or supplies? Or do you want to buy fixed assets, such as equipment or real estate? Loans can also support seasonal financing, remodeling, or refinancing business debt.

Knowing this will guide your choices.

Some loans work best for short-term needs while others suit long-term plans. For example, a Small Business Administration (SBA) 7(a) loan may cover machinery costs. A business line of credit can cover day-to-day expenses, provide cash flow, or serve as overdraft protection.

Calculate How Much You Need

List all your business expenses. Include costs like equipment, supplies, rent, payroll, inventory, and marketing. For example, a microloan can cover up to $50,000, which may be sufficient for smaller needs.

Consider both current and future costs. If you need a vehicle for your business, secured term loans can finance up to 100% of the purchase price of new vehicles or 90% of used vehicles. Decide how much funding is needed to keep operations running smoothly without taking on unnecessary debt.

Decide on Short-Term vs Long-Term Funding

Short-term funding is best suited to immediate needs. Use it for inventory, seasonal expenses, or small updates. Business lines of credit and checking account credit lines are common options.

They often have higher annual percentage rates but shorter repayment terms.

Long-term loans are well-suited to major investments such as real estate or large equipment purchases. SBA 7(a) loans and SBA 504 loan programs are great examples. These offer fixed rates with longer repayment periods, often up to 20 years.

Choose based on how soon you’ll repay and the cost over time.

Evaluate Your Financial Readiness

Understand your money situation before applying. Lenders check your credit and finances—be prepared.

Check Your Personal and Business Credit Scores

Lenders check both personal and business credit history before approving a loan. A strong credit score increases your chances of approval and helps you get better terms, like lower interest rates.

For personal scores, aim for 680 or higher to qualify for most loans.

Review your credit reports often for mistakes or fraud. Use resources like FDIC.gov to stay informed about identity theft protection. If there are errors, dispute them quickly with the reporting agency.

Strong credit demonstrates to lenders that you can manage debt responsibly, which builds trust in your financial habits.

Organize Key Financial Documents

Gather tax returns for your business and yourself. Include at least the last two years of filings. Bring profit-and-loss statements to show income and expenses.

Collect balance sheets showing assets, debts, and equity. Separate personal accounts from business accounts for clear FDIC insurance coverage. Prepare documents such as bank statements, collateral records, and mortgage details as needed for secured loans.

Attach proof of cash flow, like recent revenue reports. Debt-to-income ratio paperwork may also be required by lenders to check finances. Keep all papers updated and easy to access during underwriting reviews.

Understand Your Debt-to-Income Ratio and Cash Flow

Know how much money you owe compared to what you make. This is your debt-to-income ratio. Lenders review this to determine whether you can afford the loan. A lower ratio makes approval easier.

Watch your cash flow, too. This shows how cash flows into and out of your business. Strong cash flow helps cover bills, payroll, and more. It also proves your ability to repay loans on time.

Create a Strong Business Profile

Show your business’s strengths with a clear plan, solid numbers, and growth goals—this helps you stand out to lenders!

Write a Solid Business Plan

A clear business plan boosts your chances of loan approval. Detail how you will use the money and how it will help your business grow. Include specific goals, like expanding operations or hiring staff.

Include revenue projections and budget forecasts to demonstrate to lenders that you can repay the loan. Highlight market opportunities and growth potential to prove the strength of your idea. Many SBA loans, such as the 7(a) program, require this level of detail.

Free guidance from SBA counseling services can help small business owners create this plan.

Include Revenue Projections and Budget Forecasts

Show your expected income and expenses in the business plan. Include revenue projections to prove you can repay the loan. Lenders use this to decide how much to lend. If you apply for an SBA loan, they will ask for these numbers.

Create a budget forecast to show planned spending. This helps lenders determine whether your request aligns with your needs. Programs such as the SBA Microloan Program often require detailed budgets.

Accurate forecasts improve approval chances and build trust with bankers or other lenders.

Demonstrate Market Opportunity and Growth Potential

Lenders want proof that your business can grow. Show strong demand for your product or service. Highlight how your industry is expanding and share recent trends.

Include revenue forecasts in your plan. Use real numbers to back up claims about growth. SBA loans, like the 504 Loan, help businesses with clear potential. These offer fixed rates for long-term projects that drive growth.

Explore Types of Business Loans

Business loans come in many forms, each serving different needs. Choose the one that matches your goals and business type.

SBA (Small Business Administration) Loans

SBA loans offer great options for small businesses. Loan amounts range from $500 to $5.5 million, giving flexibility based on needs. These loans often have lower down payments and better terms than other loans.

In some cases, you may not need collateral.

The 7(a) loan is the most popular SBA program for long-term financing. Microloans provide up to $50,000 for small businesses or nonprofit childcare centers. Only approved lenders, such as Wells Fargo, can issue these loans; they can process amounts up to $15 million.

For disaster recovery aid, SBA offers direct loans only in emergencies.

Traditional Bank Loans

Traditional banks like Wells Fargo offer a mix of secured and unsecured loans. The BusinessLine Line of Credit is unsecured and offers amounts from $10,000 to $150,000. If you need additional funds, the Prime Line of Credit offers secured amounts ranging from $100,000 to $1 million.

Rates for secured options begin at Prime + 0.50%. Businesses with revenue between $2 million and $25 million qualify for this option. You can also access help at many bank branches across the U.S. Wells Fargo Bank, N.A., a member of the FDIC, supports both small and mid-sized businesses with these solutions.

Online Business Loans

Online lenders make applying for business loans quick and easy. Many offer digital forms and fast approval times. You can use tools like the SBA’s Lender Match to find approved lenders online.

Some platforms, like BusinessLine, allow applications for up to $100,000.

Interest starts adding up as soon as you use funds from an online line of credit. These loans often require a FICO score comparable to that of bank loans. Most online lenders clearly display their annual percentage rates and payment schedules.

Online banking is also available 24/7 for lending products, making it simple and convenient to manage your loan.

Microloans from Nonprofits

Microloans are small loans for businesses needing less capital. The SBA Microloan Program offers up to $50,000 for small businesses and nonprofit childcare centers. These loans often come from nonprofit intermediaries.

Some microloan programs provide coaching or technical help along with funding. This extra support can include business education or guidance on managing funds. Loan amounts vary; check the minimums with the lender before applying.

These loans are well-suited for startups and smaller businesses seeking to grow without incurring significant debt.

Business Lines of Credit

A business line of credit works like a credit card. You borrow only what you need, up to your limit, and pay interest on the amount used. For unsecured lines, limits range from $10,000 to $150,000 with rates starting at Prime + 1.75%.

Secured options go higher, from $100,000 to $1 million, with better rates starting at Prime + 0.50%.

This option is great for handling cash flow or covering payroll during slow sales periods. Some lenders offer additional perks, such as overdraft protection through linked accounts. Navy Federal provides secured credit lines beginning at $10,000.

Make sure to compare interest rates and fees, as they vary by lender and product type.

Equipment and Inventory Loans

Equipment and inventory loans help businesses grow. You can use these loans to purchase machinery, tools, or additional inventory for your company. Many lenders let you secure the loan with the equipment or items you are purchasing.

This makes it easier to qualify.

These loans offer flexibility for both new and growing companies. For example, some cover construction needs, remodeling projects, or new technology upgrades. Up to 80% of the cost of brand-new commercial vehicles may be financed through certain programs, such as Navy Federal options.

There are no prepayment penalties on their vehicle loans, helping reduce costs over time.

Merchant Cash Advances

Merchant Cash Advances offer quick funding based on your future credit card sales. They are well-suited for businesses with high daily credit card transaction volume. You repay a percentage of daily receipts, not a fixed amount.

These advances usually come with higher fees and short repayment times. They are not backed by the government, so terms vary by provider. This option works best if you need quick, flexible cash but cannot obtain traditional loans.

Know Where to Apply for a Loan

Find lenders that match your business needs and offer fair terms—explore options to discover the best fit for you!

Local Banks and Credit Unions

Local banks and credit unions offer a range of loans for small businesses. They offer options such as Business Lines of Credit, Commercial Real Estate Loans, and Vehicle Loans. Navy Federal is a popular choice for business owners needing financing for growth or equipment.

Membership is required to apply there, so you must be in good standing.

Credit unions often prioritize community and may support Veteran-owned businesses through special programs. For example, Navy Federal offers 24/7 account servicing and may take up to 5 days to make a decision after receiving all required documents.

Real estate loans through them typically have a standard 5-year term with 20-year amortization. Local lenders can also provide personalized support that larger banks may not.

Online Lenders and FinTech Platforms

Online lenders offer fast and simple ways to apply for loans. Some allow you to apply online 24/7, such as Wells Fargo, with amounts up to $100,000. You can view annual percentage rates and payment schedules before signing.

Many platforms provide secured or unsecured loan products. They may need a guarantor with a FICO score of 680 or higher. SBA’s Lender Match tool helps you quickly connect with approved lenders.

After approval, you’ll often receive written confirmation online for convenience.

SBA-Approved Lenders

SBA-approved lenders work with the Small Business Administration to offer loans to small businesses. These include SBA 7(a) lenders, Certified Development Companies, and intermediary lenders who specialize in helping entrepreneurs.

Wells Fargo is a preferred lender, offering loans up to $15 million to qualifying businesses.

The SBA Lender Match tool helps you find approved lenders by simply sharing basic business information. To qualify for an SBA loan, your business must be registered and operate for profit within the U.S. or its territories.

Exporters can receive additional support through programs such as the SBA Export Finance Managers and the Office of Manufacturing and Trade.

Community Development Financial Institutions (CDFIs)

CDFIs offer loans of up to $50,000 to small businesses, particularly in underserved areas. These lenders often have more flexible rules than banks.

Many CDFIs also provide support, such as coaching and tools, to help your business grow. They focus on local economic development and are usually nonprofit groups. You can find approved CDFIs on the SBA website.

Steps to Apply for a Business Loan

Start by researching lenders that suit your needs—compare their offers and terms. Then, prepare all required documentation to demonstrate your business’s financial health.

Compare Lenders and Loan Products

Look at both government-backed loans and private options. SBA loans provide flexible terms and extra guidance, which is helpful for new businesses. Traditional bank loans, such as those from Bank of America or PNC Bank, may offer lower rates but come with stricter requirements.

Compare interest rates, such as Prime + 1.75% to Prime + 9.75%, with those offered by other lenders, including fixed- and variable-rate options. Wells Fargo’s Prime Rate sits at 6.75% as of December 11, 2025.

Online lenders often approve applications faster but may charge higher fees or APRs than traditional banks. Consider prepayment penalties and origination fees when deciding between secured and unsecured loans, or between term loans and lines of credit.

Get Prequalified Where Possible

Prequalification helps you understand your chances before applying. Some lenders, such as online platforms, offer instant loan decisions for amounts up to $100,000.

This process may involve a soft credit inquiry or the collection of basic business details. It does not affect your credit score and indicates your approval odds. Written confirmations often indicate the maximum amount you may receive, but do not guarantee final approval.

Services like SBA’s Lender Match connect you with potential lenders based on submitted data.

Gather and Submit All Required Documents

Collect all the needed documents for your loan. This includes your business plan, financial statements, and tax returns. Both personal and business credit reports must be ready. For secured loans, you may need collateral paperwork.

Submit everything to your lender on time. SBA loans need proof you’ve tried other funding options first. Navy Federal may request appraisal or environmental fee records if real estate is involved.

Missing any document can delay approval, so ensure completeness before submission.

Prepare for a Loan Interview or Application Review

Lenders often ask for interviews to discuss your business plans. Be ready to explain how much money you need, why you need it, and how you will use it. They may also check your debt-to-income ratio, cash flow, and credit scores during the review process.

Bring all required documents, like tax records and financial statements.

Some lenders might schedule in-person or virtual meetings for bigger loans. SBA-approved lenders could focus on revenue projections or market opportunities from your business plan.

Show confidence in your answers and have details about growth plans ready. Offering collateral can strengthen your case as well.

Tips to Improve Your Approval Odds

Lenders want to see strong credit and steady income. Show clear financial records to boost your chances.

Strengthen Your Credit Score

Check your credit report for mistakes. Errors can hurt your score. Fixing them boosts your chance of approval.

Pay bills on time every month. Late payments lower scores fast. Aim to reduce debt, keeping balances below 30% of the limit on personal or bank credit cards.

Focus on both personal and business credit history. Lenders such as Bank of America Corporation and SBA programs consider both before approving loans.

Protect against identity theft by regularly monitoring reports. A FICO score above 680 helps you get better terms, rates, and approvals from most lenders, like Navy Federal or Discover Financial.

Offer Collateral If Needed

Some lenders need collateral for business loans. This could be property, equipment, or inventory. SBA loans sometimes require it, but may allow flexible options depending on the program.

For example, commercial real estate loans are secured by the financed property, and owner-occupied properties can have up to 80% loan-to-value.

Collateral lowers risk for lenders and boosts your chances of approval. Ensure you have the required documentation ready during underwriting. Personal lines of credit or home equity can also work as collateral in some cases.

Offering assets demonstrates your commitment to repayment and builds trust with lenders.

Find a Co-signer or Partner with Strong Credit

A co-signer can boost your loan chances. They should have strong credit and enough income to back the loan. Lenders may require this if your credit or cash flow is weak.

Business partners with solid credit also help. Multiple guarantors increase lenders’ confidence in approving the loan. SBA loans often require personal guarantees from owners who hold at least 25% of the business.

Apply for a Manageable Loan Amount

Request a loan your business can afford to repay. Lenders often consider your debt-to-income ratio and cash flow before approving a loan amount. For example, SBA loans range from $500 to $5.5 million, but you should choose the amount that fits your needs.

If you need less capital, microloans are available for up to $50,000.

Support your request with clear revenue projections and budget forecasts. These demonstrate to lenders how you plan to use the funds and how you will repay them on time. Keeping the loan realistic also improves your chances of approval while avoiding unnecessary financial strain later on.

Show Consistent Revenue or Customer Growth

Lenders want proof that your business is steady. Show them consistent revenue over at least six months. Share clear sales data, invoices, or recent deposits to highlight growth trends.

Include customer growth numbers if possible. For example, share a monthly increase in orders or new clients. Strong performance may qualify you for better loan terms and lower interest payments.

Common Loan Terms and What to Watch Out For

Loan terms can be tricky—watch for extra fees or hidden costs. Stay sharp about interest rates and repayment timelines… small details matter!

Interest Rates and APR

Interest rates show how much you pay to borrow money. APR, or Annual Percentage Rate, includes interest and other loan costs, such as fees. Many banks disclose the APR so you know the full cost.

For example, Business Checking Line of Credit has a fixed 17.9% APR.

Rates can vary by lender and loan type. SBA loans often offer better terms with both fixed and variable rates. Wells Fargo uses a Prime Rate of 6.75% as of December 11, 2025. Some lines of credit start at Prime + 0.50%.

Always compare these numbers before choosing a loan!

Loan Repayment Period

Loan repayment periods depend on the type of loan you choose. SBA 7(a) loans often stretch to three years or more, which helps with steady payments. Business lines of credit can last a few years but work better for short-term needs instead of big investments.

SBA Microloans come with specific repayment deadlines, so plan carefully. If you use personal lines of credit, be prepared for the risk of collateral loss if payments are missed. Align your business income with payment schedules to avoid cash flow issues.

Origination Fees and Other Costs

Origination fees vary by lender and loan type. These fees cover processing your application. They may range from 1% to 5% of the loan amount. SBA Microloans, for example, often have lower origination costs compared to traditional loans.

You might also face closing costs or documentation fees. Some lenders charge prepayment penalties if you pay off a loan early. Check credit reports for errors that could increase costs or cause rejections.

Compare offers from multiple lenders to catch hidden charges and secure better terms. Use resources such as the SBA or FDIC websites to learn about these expenses in detail.

Prepayment Penalties or Balloon Payments

Paying off a loan early may incur additional costs. Lenders may charge prepayment penalties, which increase your total cost. Check the terms carefully to avoid surprise fees.

Balloon payments mean you must pay a large amount at the end of your loan term. These can cause trouble if you’re not ready. SBA loans or business lines of credit may reduce these risks with better terms.

Always compare lenders and options closely before signing anything.

Alternatives to Traditional Business Loans

Think about crowdfunding, grants, or equity financing… these options can offer fresh ways to fund your business dreams.

Crowdfunding Platforms

Crowdfunding platforms enable you to raise funds from many people. These work well for small businesses and startups. You don’t have to go through banks or lenders. Instead, backers fund your idea in exchange for rewards or equity.

Pick the right type of crowdfunding to match your business needs. Rewards-based campaigns offer products or services in return for support. Equity-based models give investors a share of ownership in your company.

Debt-based options involve repaying funds later, often with lower risk than bank loans. A clear plan and smart marketing help attract more backers while building awareness for your brand, too!

Peer-to-Peer Lending

Peer-to-peer lending connects borrowers straight to individual lenders. This skips banks and can lower interest costs for your business loan. It works through online platforms where you post your loan needs, and investors decide whether to help.

Check your credit report before applying. Errors on reports can hurt your chances of getting good terms. Fix mistakes early to improve approval odds. Regularly monitoring your credit also helps protect against identity theft, which could affect future loans.

Business Grants and Competitions

Business grants and competitions can fund your business without requiring repayment. Governments and nonprofit groups offer these as great alternatives to loans. They are ideal for small-business owners seeking help starting or growing their companies.

Grants focus on specific needs such as technology, community impact, or education. Competitions often reward innovation or outstanding plans with cash prizes. By applying, you can secure funding while avoiding the personal liability associated with traditional loans.

It’s free money if you qualify, so explore options regularly!

Equity Financing

Equity financing gives you money for your business in exchange for ownership shares. Unlike loans, you don’t have to repay it. This eases financial pressure and helps startups grow.

Angel investors, venture capitalists, or crowdfunding platforms offer this type of funding.

You also don’t need collateral to secure equity financing. Investors often bring expertise and connections that benefit your company’s growth. A clear business plan with revenue forecasts quickly attracts these investors.

Demonstrating market potential can improve your chances of securing funding.

Red Flags and Risks to Avoid

Stay alert for lenders with unclear terms or unfair extra charges. Some loans may seem easy, but they can trap you in high payments later. Be cautious!

Predatory Lenders with Exorbitant Fees

Predatory lenders thrive by charging high fees and hidden costs. If fees go above 5% of the loan amount, it’s a warning sign. They might also pressure you to accept the terms quickly, using tactics that make it hard to think clearly.

Always check for transparency in rates and payment schedules. A fair lender clearly shows the annual percentage rate (APR) and all other costs up front. Avoid deals with no credit checks or “guaranteed” approvals.

Consult financial experts if any terms seem unclear or unfair.

Loans Without Transparent Terms

Loans with unclear terms can create big problems. Hidden fees, such as origination costs exceeding 5% of the loan amount, make repayments more difficult. Extremely high interest rates also hurt your business’s cash flow.

Some lenders may pressure you to sign quickly, which is a red flag.

Check for clear terms before agreeing to any loan. Compare offers from different lenders and get advice from trusted financial experts if needed. Use resources like SBA counseling to better understand loans and avoid risky deals.

Always read the fine print carefully to protect yourself and your business.

Guaranteed Approvals with No Credit Checks

Avoid lenders that promise guaranteed approvals with no credit checks. These often come with high fees, hidden terms, or very high-interest rates. They may seem easy, but they can trap you in a cycle of debt.

Check the terms carefully before signing anything. Predatory lenders target small businesses and individuals who need quick cash. Protect yourself by working with trusted banks, such as Bank of America, or SBA-approved lenders.

Always prioritize clear and fair loan agreements over risky shortcuts.

Final Thoughts

Getting a business loan can feel tough, but it’s possible with the right steps. Know your needs, build a strong plan, and gather all documents. Choose the loan type that best fits your goals.

Apply with confidence and demonstrate to lenders that you are ready to grow! Stay focused and take action today!

Sources:

• bankrate.com/how-to-get-a-bad-credit-loan
• chase.com/build-credit/loans-with-bad-or-no-credit
• cnbc.com/loans-to-apply-credit-score-580-or-lower