Your ultimate guide to

small business loans

May 1, 2018
Small Business Loans

Your business feels like it’s bursting at the seams and the time is finally right to expand. Maybe you need a loan to hire new employees, buy updated equipment, or relocate your headquarters to a larger office. But getting small business loans is a long, arduous process, right? We don’t think it needs to be.

The first step to getting a small business loan starts with your credit scores — both of them. Too many small business owners have relied on their savings and personal credit to fund their ventures. In fact, about half of small business owners use their personal credit to fund their business in some way, so you’re not alone. But this is seriously problematic. If you’re guilty of intertwining your personal and business finances, separating the two and establishing a business credit profile is key to locking down additional funding.

With that in mind, here are some of the pain points of small business loans and how to get past them so you can find the right financing for your business.

Business credit scores matter

While not all business loan options require you to have a business credit score, your options are certainly limited if you’re a business credit ghost. Business credit scores use some of the same factors (such as payment history) to determine your score, but there are some important differences. Establishing and building your credit is key if you’re serious about getting a loan.

Sign up for Nav to see BOTH your credit scores.

44+ types of business financing

Yeah, you read that right. And those 44 different types of financing can be hard to sift through, even if you’re asking the right questions. How can you tell if you’re getting a good deal? How will you know which one is the right loan type for your business model? How long will you be paying it off? All of these are valid questions that our experts can help you answer.

Learn more and find the loan that’s right for you.

Small business loan terms are unique

Just like your business credit scores are different from your personal credit scores, your business financing options are different from the personal financing you’re probably familiar with. Repayment timelines, APRs, and origination fees are all structured differently, and the consequences of picking the wrong loan for your business can hurt your bottom line.

Discover how much your business loan will truly cost.

Business loan types

Learn the ins-and-outs of each loan type so you can choose the right one

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Nav works for you, not the lenders. Our marketplace filters over 100 of the top business financing products and matches you to the best, based on your approval odds. You can apply online and get a decision in minutes.

Business financing 101

Get the best loan for you – no matter what category you’re looking for

Business Loan Calculators

Find out the true cost of a loan before applying

You may have heard the terms APR and interest rate used interchangeably—but they’re not. The main difference is that APR looks at the entirety of the loan cost, including fees. We think using a business loan calculator is the best way to make an apples-to-apples loan cost comparison. Origination fees, maintenance fees, factoring fees, and daily repayment schedules are not unheard of when it comes to business loans—be sure to read through the full terms of your loan offer before committing to that kind of repayment.

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Business loan FAQs

Frequently asked questions

  • How can I qualify for a business bank loan? Understanding how to get a business loan can be confusing. Qualifying will depend on the lender you want to work with and a number of business-specific factors, including your credit scores, business credit scores, years in business, and annual revenue.
  • What’s the deal with online business loans? It’s no secret that the application process for a traditional business bank loan is long and grueling—you’ll fill out lots of paperwork, the underwriting process can take months and the vast majority of business don’t qualify for them. A new generation of alternative lenders are filling the gap for business owners that want quick and convenient loans. Online business loans typically take days or even minutes to qualify for, but the trade-off is cost—these options are often 1.5 - 100X the cost of a traditional loan, so you need to read any term sheet you get from an online lender carefully.
  • What are the requirements for a business loan? Requirements vary by lender. In particular, you will want to know these 4 things about a lender before you apply:
    1. Minimum time in business required
    2. Annual or monthly revenue required
    3. Minimum credit score required
    4. Any automatic disqualifiers (if applicable)—bankruptcies, UCC filings, etc.
    Pro tip: Discover what financing options you are likely to qualify for with a free Nav account. We’ll tell you your likelihood to qualify based on your personal and business credit scores and business data.
  • What documentation do I need to apply for a loan? Personal Items:
    1. Your personal credit report
    2. 1 year personal tax returns
    3. Photo identification
    Business Items:
    1. List of why you need funding and how it will be used
    2. Your business credit scores
    3. Profit & Loss statement
    4. Business plan
    5. Financial projections
    Other items:
    1. Address verification (both personal and business)
    2. Voided check
    3. Lease agreement (if you occupy leased property)
  • I have bad credit. Can I still get a business loan? Bad credit business loans do exist, but there is an important trade-off you need to know about. The riskier your business is in the eyes of a lender, the higher annual percentage rate (APR) you will likely pay on financing to cover that extra risk. Learn more about bad credit business loan options here.
  • Are there any business loans that don’t require a personal guarantee? Businesses that are young and lack strong business credit scores or financials are often required to sign a personal guarantee, which states that they are personally responsible for the debt if the business does not pay it. Avoiding personal guarantees takes time. The best step you can take now is to establish solid business credit. If you already have a strong business credit score, you can ask your lending specialist if you can get a waiver of the personal guarantee. If you have collateral to secure your business loan, this might be another way to avoid a personal guarantee. Keep in mind, however, that by securing a loan with collateral, you are giving the lender first rights to your collateral should your business default on the loan.
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