Business loans can provide you with the funds you require to purchase equipment or inventory, finance business expansion or pay employees, and also cover other costs. Before you apply, make sure you understand how loans work and what kind of documentation you’ll have to submit to your lender. Also, be aware of how long the application process can take and any charges you might incur.

Common uses of business loans

A business loan could allow you to pay for unexpected expenses, such as a damaged chair at work or the COVID-19 Pandemic. Additionally, you may need to borrow funds to cover an unexpected capital expenditure, like replacing or upgrading technology, purchasing manufacturing equipment or renovating a store. Some lenders offer credit lines that allow you to draw funds as needed, with a set maximum and interest charged only on the amount used.

Application process and eligibility requirements

You will be required to provide specific information about your company including the official name of your company along with its tax ID as well as any financial documents. This could include business plans, proposals, and statements of profit and loss along with the names and Social Security numbers of those who hold 20 percent to 25 percent or more of your business. Some lenders require that you have been in business for at least one year, while other lenders accept startups or do not have any time-in-business requirements.

It is beneficial to have a mentor or adviser to help you navigate the process of obtaining business loans. SCORE is a good example. It has a network of business mentors that provide advice for free or at a low cost for entrepreneurs who are starting their own businesses. You can find local chapters to meet with an advisor in person.

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