There isn’t a standard process for getting a short-term business loan because it depends on the lender and the type of financing. That said, below are the general steps to follow to obtain a short-term business loan.
Determine the business’s borrowing needs
- Before looking for a capital provider, a business should evaluate the reasons it needs a short-term loan. In particular, it should confirm that bringing on debt will improve its efficiency and increase revenue.
- The business should also figure out if it is better for it to get a line of credit or get a lump sum of cash. The latter may sound great, but the business will need to pay interest on all the provided funds right away even though it might not need all the cash at the beginning of the loan term.
- After reviewing the business’s borrowing needs, the business should be able to determine the loan amount it needs and confirm what will work with its budget.
Check credit score
- If the business is established, it should check its business credit score via Experian, Paynet or Dun & Bradstreet.
- The majority of business loans are personally guaranteed by the business owner, so the business should also check the business owner’s personal credit score. The business owner should have a FICO score of 600 or higher to be eligible for a short-term business loan.
Shop lenders
- Once a business knows what type of short-term debt it wants to obtain and the loan amount it desires, it’s time for it to shop around with lenders. It’s best for the business to run through each lender’s eligibility requirements to see what its chances are of getting approval. It’s also important for the business to read reviews to check if the lender has any red flags.
Gather documentation
- Lenders will require information about a business during the application process, so it’s ideal for the business to get ahead and gather the documentation needed. Here is a list of items a lender will typically want to see:
- Business plan
- Length of time in business
- Credit report(s)
- Business tax returns
- Business owner’s tax returns
- Projected annual or monthly revenue
- Historical annual and monthly revenue
- Proof of collateral the business will offer if it is applying for a secured business loan
- Business license and/or registrations
Submit an application
- The business should go to the lender’s website to send in a loan application. Most lenders provide online applications, but it may be required to speak to a customer service representative on the phone.
