How to Complete an Online Application for a Small Business Loan

Author: Randy Lang

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How to Complete an Online Application for a Small Business Loan
 
Living within the millennial world, technology surrounds us on a daily basis. It changes everything we do; how we shop, how we make travel arrangements, how we get immediate answers to questions. Because of this, there are more small business loan options than there ever have been.
 
As smartphones, tablets, and computers have fast-tracked businesses and saved business owners time and money, it’s no wonder that online applications have been the go-to. Many lenders have reported that filing an online loan application is an easier process than going through a bank or credit union. They have also reported that you need less documentation for an online application.
 
Online lenders are viewing the health of a business differently than a credit union or bank. Technology is also allowing lenders to make credit decisions and offering capital more quickly to businesses. The process can now take days rather than weeks or months. That being said, an online application does need to be more than just simply publishing an electronic form.
 
When it comes to online applications, there has been a stream of frequently asked questions. We wanted to help by addressing them here.
 
Frequently Asked Questions When Applying for a Business Loan:
 
Which documents will I need to bring for a business loan?
 
This depends on where and how you apply for a business loan. We’ve learned through experience some documentation that is most likely to be required of you. If you have these documents at your fingertips, it will make your process for a loan much easier whether that’s at a bank, credit union, or online.
 
The documents that you may need are:
 
  • A business license
 
  • Business bank statements for the last 3 months
 
 
  • Personal financial information
 
  • Copy of your business lease
 
  • Income tax returns
 
Do I need collateral to get a small business loan?
 
Many traditional lenders will require specific collateral for a small business loan.
 
How do I apply for a small business loan?
 
First, you need to make the decision of whether you are applying for a loan at your local bank or credit union. At either place, you will meet with a loan officer and be given the necessary forms to complete the application.
 
How do I apply for an online business loan?
 
Some online business loans will vary from one another. They should all be quite similar. In general, you will complete a simple online application that is described above and send over some documentation. See the list above for references on documents needed.
 
How do I apply for an SBA loan?
 
The SBA (small business administration) is not classified as a lender. They do offer a loan guarantee program with credit unions, banks, and other lenders. You can research which local lender in your area participates with the SBA.
 
How do I know whether or not I can trust an online lender?
 
We live in a world of reviews. How often do you buy something online without reading the reviews? The same goes for an online lender. You can look for them on review sites like Google Reviews. You can also check their “Better Business Bureau” ranking.
 
How long does an online application take?
 
This question depends on where you are applying for your online loan. Generally speaking, an online loan process, including the decision, can take a few hours or days. It is unusual for an online loan to take longer than that.
 
Can I get a business loan after a bankruptcy?
 
The following 10 years after a bankruptcy appears on your credit will make it more difficult to qualify for a business loan. With that being said, there are lenders that will be willing to help your business if the bankruptcy has been discharged for more than two years.
 
Do I need a business plan to get a business loan?
 
Lenders that are linked to banks or credit unions will typically require that you have a business plan. If you do not have a business plan, your odds of getting a loan are higher IF you pursue an online business loan. This is because many online lenders look at other business metrics rather than a professional business plan.
 
How do I get a startup loan?
 
The SBA (Small Business Administration) has a guaranteed program for well-qualified startups.  Besides the SBA, there are few loan options for small startup businesses. Unsecured seed capital is the best new business loan option we have found for those with good to excellent credit. When it comes to traditional lenders, they will require that a business has had a few years of experience. However, you have better chances of receiving a business loan online if you have been in business for at least a year.
 
Do I need a personal guarantee to get a Small business loan?
 
In most business cases, yes. Small business owners are often required to have a personal guarantee when beginning the application process.
 
Do I need collateral to get a loan or lease for equipment?
 
Any equipment you are buying or leasing is typically considered the collateral in a loan.
 
Can I get a business loan without being a corporation? Can a sole proprietor get a business loan?
 
You do not need to have a corporation to be approved for a business loan. You do need to have a registered business with a specified business checking account. Another thing you will need to have is a business tax I.D. number. Depending on your lender, there may be potential benefits for having a corporation. Take the time to consult with an attorney to discuss your options. If there are great benefits for having a corporation, it may be worth the time and effort to switch the nature of your business’ identity. Regardless of having a corporation or not, your business loan must only be strictly used for business purposes.
 
Can I get a business loan without a perfect personal credit score?
 
Unfortunately, your personal credit score will continuously be a big part of your business’ creditworthiness. If you do not have a high credit score, filing for an online business loan may be your better option. Lenders associated with banks and credit unions weigh the value of your personal credit score heavier than most online lenders do. If you otherwise have a healthy business and can support that statement with facts and numbers (especially the cash flow to prove you can make timely payments), you can still qualify for a small business loan without a high personal credit score.
 
It is a common trend for lenders to evaluate your pre-existing credit behavior to foreshadow what you will do in the future. When applying for a small business loan, you should be prepared to explain any past circumstance that may have hindered you from having a good credit score.
 
In general, anyone with a credit score lower than 680 will have a difficult time qualifying for a small business loan through a bank or credit union. A personal credit score below 650 will also likely be ruled out for receiving a SBA loan. If you are someone who has a credit score within this range, you will most likely need to look at alternative financing options for the time being. Taking the chance now to improve your credit score will give you business financing options in the future that you might not otherwise have.
 
Now that we’ve gone over the most frequently asked questions about online business loans, has the question, “how will a business loan help me?” crossed your mind? There are many reasons why you should apply for a small business loan. Here are our top three:
 
  1. Expansion
 
This is probably the most obvious reason to consider a small business loan. If all of the sudden your business is booming and seeing success, the last thing you want is for your profits to plateau or fall. To ensure this doesn’t happen, you need to continue to grow your business. A small business loan can help with the expense of expanding your business without demolishing your operational funds.
 
2. Inventory
 
When it comes to owning a company, inventory can be tricky business. Inventory is typically the largest (and sometimes most difficult) expense in many industries across the globe. To run a successful business, you need to invest in products to carry before your customers buy them and offset the cost. When things are running more smoothly, you will need to continue to replenish your inventory to keep up with the demand of customers. A small business loan can help offset your inventory costs without affecting your cash flow.
 
3. Cash Flow
 
Have you ever heard that phrase, “Cash flow is king?” As a small business, you should quickly acquaint yourself with this phrase. Having steady cash flow can be difficult for any company, especially when you have customers who don’t pay their invoices in a timely manner. Cash flow can also be a problem when you have old inventory that’s difficult to sell and you need space for new inventory. A small business loan can provide the money that can be used for inventory costs or other operational costs. This will help your business stay afloat even when profits are lower than usual.
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