What You Need to Know About Business Loans

Business loans can provide you with the money you need to purchase equipment or inventory for business expansion, finance business expansion pay employees and cover other costs. Before applying, make sure to understand how these loans operate and what documentation you’ll need to submit to your lender. Be aware of how long the application process can take and any charges you might incur.

Common uses of business loans

A business loan can allow you to pay for unexpected expenses, such as an injury to your chair at work or the COVID-19 Pandemic. There may be times when you need to borrow money to fund the cost of an investment that is not necessary, such as upgrading or replacing technology, purchasing machinery for manufacturing, or even remodeling your store. Some lenders offer credit lines that let you draw funding as needed with a predetermined maximum and interest charged only on the amount used.

The application process and eligibility requirements

To be eligible for a commercial loan, you’ll need to provide detailed information about your company, which includes the official name of the business, tax ID number and financial documents. This may include business plans, proposals, and profit and loss statements as well as the names and Social Security numbers of those who hold 20% to 25% or more of your business. Some lenders require that you have been in business for a minimum of one year, while others allow startups and don’t have any time-in-business requirements.

It is helpful to have a guide or mentor to guide you through the process of obtaining business loans. SCORE is a good example. It has an extensive network of business mentors that provide free or low-cost advice to entrepreneurs in the early stages and small businesses. Find local chapters and meet an advisor in person.

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