Intro: How to Get a Small Business Loan for a New or Growing Business


Have you been wondering how to get a small business loan? If you have, chances are good that you have a big idea and a hopeful spirit.

Maybe your big idea is to open the best coffee shop in town or maybe it’s owning a bookstore with a bunch of cats for co-owners. Maybe it’s the very first stage of the next Fortune 500 company.

You have the smarts, the know-how, and the work ethic you need to change the world with your business idea.

All you need now is the capital to back it up. So it behooves you to learn how to get approved for a small business loan.

No matter what dream you have, it’s pretty much common knowledge that it’ll take money to make it come true. When you don’t have money of your own left, you might need to go about getting a small loan. So, how exactly do you go about getting a small business loan?

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This article will teach you how to get a small business loan as well as where to get a small business loan. So, sit back, relax, and pet your future co-owners. You’re about to learn how to how to get a loan for a small business.

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Start at the Beginning

How do we know where to start when getting a small business loan? When looking to get a small loan, instead of trying to change your business model after you’ve already done a lot of work, wouldn’t it be easier to start out making the proper choices to get approved for a small business loan from the very beginning?

Of course! Let’s discuss the right place to start the process of getting a small business loan.

If you are in the position to grow your ideas in such a way that you can maximize them through getting a small business loan, here is some advice from the U.S. Small Business Administration website:

Even before you start gathering and organizing the information required by lenders to consider your application, you should educate yourself regarding business loans so you can understand and discuss intelligently with the lending officers when the time comes.”

In other words, don’t go into that first meeting blind. Be sure you understand how to get approved for a small business loan before you even ask for one. Contact your loan officer and ask what paperwork you’ll need to provide, what credit score you’ll need, and what particular criteria there is for issuing a loan.



The U.S. Small Business Administration website advises that you should “Be prepared; be thorough; be truthful.” This isn’t just great advice for getting a small business loan; this is also excellent advice for life in general.

Besides this excellent advice, here are a few more pointers from the SBA about how to prepare in advance to get a small loan:

  • Be careful when choosing your lending institution. Larger banks will often avoid small loans since they are less profitable while taking the same amount of underwriting and servicing. This doesn’t mean that large banks will not approve small loans; it is just more difficult.
  • Approach lending institutions or banks which you have used before or where you are a current customer.
  • Take a look at credit unions and community banks.
  • Speak with a lending officer to determine exactly what documentation is necessary.
  • Be thorough and bring all required documents. Often, loan applications are denied or require additional steps because of incomplete applications.


What Does a Bank Look for When It Provides a Small Business Loan?

There are a lot of different banks in the world, and they all have different criteria for approving loans. It’s a good idea to do your homework and find out how to get approved for a small business loan by your particular lending institution. In general, though, there are a few things all banks will require. According to the U.S. Small Business Administration website, you’ll need to meet the following qualifications:

  • “The loan must be for a sound business purpose. For SBA-guaranteed loans, the business must be eligible based on size, use of loan proceeds and the nature of the business (no lending, speculating, passive investment, pyramid sales, gambling, etc.)
  • You and your partner(s) are of good character, have experience and good personal and/or business credit history
  • Ability to pay back the loan – reasonable to strong collateral (personal and business assets) is very important. SBA expects the loan to be fully secured, but we will not decline a request to guarantee a loan if the only unfavorable factor is insufficient collateral. And of course, owners must have personal equity investment in the business/skin in the game.”

In short, when getting a loan for a small business from a respectable bank that is regulated by the U.S. government, you’ll need a business model that presents a minimum of risk, a good credit score, collateral, and you need to have invested what you can in your business before anybody else will. If you won’t put your money where your mouth is, getting a loan for a small business will be impossible.

Does all the above sound possible to you? Great! Let’s go on to the next step in getting a small business loan.

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How Do I Choose Where to Get a Small Business Loan?

Where to get a small business loan can be as big a question as how much money you need to borrow. In fact, in many cases, you can choose where to take your loan based on how much money you need. According to the SBA, many large banks won’t give a small business loan because they take as much paperwork and processing as a larger one.

When considering where to get a small business loan, it’s also a good idea to choose a bank at which you’ve already formed relationships with the lenders. Maybe the credit union through which you took out your home mortgage has been servicing your family for fifty years. Maybe they know your parents and know that you have never been late on a payment.

If your bank knows you are trustworthy, it might be easier to go about getting a small business loan from it than it would be to get one from a banker that doesn’t know you.

getting a small business loan-minImage Source: BigStock

Maybe you don’t have a relationship with a local bank or credit union. There is also the option to choose an online lender in order to get a small loan. According to NerdWallet, it can be easier to get financing through an online lender than through a brick-and-mortar bank.

 It takes less time when getting a loan for a small business online than through a local bank. It can take a while for a local lending agent to decide whether to allow a business owner to get a small loan. Online, though, you can be approved within 24 hours. You also don’t have to be as qualified as you might have to at your bank.

The downside is that the APR can be much higher, and financing to get a small loan might cost more. It’s necessary to determine your needs and the needs of the business in order to determine what sacrifices you’ll need to make to get started.

To learn more about how to get approved for a small business loan online, click here.

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What Information Should I Take to My Lender?

We’ve discussed some of the information you’ll need to provide in order to go about getting a loan for a small business. We’ve also discussed how all banks are different, and that what you will need for one bank to approve your loan may not be enough for another.

But when it comes time to discuss how to get a loan for a small business, there are definitely a few constants. The SBA website tells us we can expect to provide:

  • “Personal and business credit history
  • Personal and business financial statements for existing and startup businesses and as well as a projected financial statements
  • Strong, detailed business plan (including personal information such as bios, education, etc.)
  • Cash flow projections for at least a year, and
  • Personal guarantees from all principal owners of the business.”

 Did you know that businesses also have credit ratings – not just people? Knowing your business’s credit score is an essential part of getting a small business loan. You will definitely want to educate yourself about business credit scores before meeting with your lending officer.

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How Much Can I Borrow?

When getting a small business loan, you might ask yourself how much money you can borrow. The answer to that question depends on what your particular business needs are.

If you are trying to fund a small startup with one employee (or a couple of friendly cats), your needs are going to be vastly different from the needs of a multi-million dollar company with hundreds of employees. Getting a small business loan can be a very different process based on each business owner’s individual circumstances.

So, how much do most small business owners ask for when getting a loan for a small business? Information from the SBA states, “… in the banking industry the median small business loan is about $130,000–$140,000 with highest around $250,000. SBA small business loans range from about $5,000 (microloans) to $5 million (largest guaranteed) with the average loan around $371,000.”

Online banks appear to vary by bank, offering amounts between $5000 and $500,000, depending on the particular lender.

So, more than just considering how to get small business loans, you’ll also need to determine how much you have to borrow based on what you plan to use the money for. There are good reasons and bad reasons to borrow money. For example, some good reasons are to purchase a piece of equipment, buy real estate for your business to use, invest in long-term software development or keep you going in a quarter where you have large seasonal sales variances.

It’s very important to determine exactly how much you’ll need to borrow when getting a small business loan. Many businesses underestimate their needs and end up short on startup capital. They find themselves paying back money while operating at a loss.

Conversely, if you overestimate how much you’ll need, you can strain your credibility with your lender and risk not being approved for the loan at all. Therefore, it is very important to have all your ducks in a row before getting a loan for a small business.



Who Can Help Me in Getting a Small Business Loan?

Are you still asking yourself how to get approved for a small business loan? If you are, don’t worry! This is a lot of information to put together on your own. You may be wondering if there is some association to help you get your thoughts and paperwork together. Well, you are in luck. According to the SBA, there are many groups who can help you.

  • SBA District/Branch Offices – at least one in every state
  • SCORE – (approximately 300 chapters nationwide)
  • SBDCs – Small Business Development Centers: approximately 900 locations nationwide, associated with higher education institutions (colleges and universities)
  • WBCs – Women’s Business Centers (approximately 100 educational centers nationwide)

Follow the links above for more information about each of these groups. Like the SBA website says, “They’re just a phone call away!”

Now you have an idea of how to get approved for a small business loan.We hope you’ve found this article both helpful and informative. More than that, we wish you the best of luck in all your business endeavors. Who knows? If you do your due diligence and work very hard, you might get to have those feline co-owners after all.

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