How to Apply For Business Loans

Business loans can be a lifeline for companies of all sizes, assisting them cope with seasonal fluctuations in sales or unexpected expenses. You can also make use of them to invest in new inventory, equipment or even a new location. It is important to use the funds wisely so that you can grow your business and not rely on debt financing in the future.

Before you apply, consider the amount of capital your business needs and which type of loan will meet those needs. You should determine the length of time you intend to repay the loan as this can affect the interest rate and fees. Many lenders offer a one-time funding option, or a credit line with terms of repayment that range from a few days to several years.

Most lenders will ask you to provide a variety of documents, such as your business plan financial statements, your business plan and credit history. They may also require collateral, like a real estate, equipment or cash owed to your business (accounts payable). Some lenders will waive these requirements for existing borrowers, those with stellar credit, or those looking for large amounts of capital.

Lenders will also evaluate whether your company is able to repay the loan using metrics like its fixed-charge coverage ratio, as well as the amount of cash it is likely to generate every month. They will also verify whether your business has outstanding loans, and assess whether or not it complies with all legal requirements. Then, they will examine your industry to determine if it’s considered volatile or in an industry that is stable.