Everything You Should Know About Small Business Loans
Are you looking for ways to fund your entrepreneurial endeavors? In this article, we explain how small business loans work and what the general administrative requirements for getting your business funded are. We will also elaborate on different types of loans and show you how to secure resources using DoNotPay.
What Are Small Business Loans?
Small business loans are designed to help small to medium-scale businesses acquire the necessary resources. The funding can cover a wide range of expenses, from working capital to equipment and inventory.
Applying for a small business loan is only possible if you meet the following requirements:
- Maintaining a viable credit score (personal and business)
- Having a clear business plan
- Being able to provide collateral
Types of Small Business Loans
Depending on why you are applying for funding and the budget you need—you have several options. The table below shows more common types of loans:
| Loan Type | Description |
|---|---|
| Business term loan | Term loans are straightforward and versatile: you request a certain amount for miscellaneous purposes and receive the lump sum within a few days. The loan amount can range from $5.000 to $2,000,000 |
| Short term loan | Short-term loans are the best solution for entrepreneurs who need funding urgently. If your application is approved, you can expect payment within 24h. You cannot receive more than $500,000 with this type of loan |
| A business line of credit | You gain access to a line of credit instead of a lump sum, and you can use the funds as needed. The amount you can get ranges from $1000 to $500,000. Once your small business loans application is approved, you can expect the money in a few weeks |
| Business credit card | Similar to the line of credit. You access the applied-for loan via the assigned credit card and can outpour up to $500,000 at once |
| Startup business loan | Startup loans cover the launching costs of businesses. The loan amounts are flexible, ranging from a couple of hundred dollars to several thousand |
| Equipment financing | If you need funding specifically for equipment, this is the best option. The available amount can go up to $5.000.000, and you are not limited to a certain type of equipment |
Small Business Administration (SBA) Loans
The Small Business Administration (SBA) is a federal agency that secures funding for small businesses. Even if you fail to qualify for other loans, it is possible to acquire substantial capital through one of the SBA programs.
Some of the most popular SBA loans are:
- SBA 7(a) loan—Covers a wide range of purposes (working capital, inventory, business expansions, real estate, etc.)
- SBA 504 loan—Meant for equipment, real estate, and other fixed assets. Provided in part by banks and the Community Development Companies (CDC)
- Microloans— Best for various business projects. The maximum loan amount is $50,000
- Disaster aid loans—The SBA disaster aid loans help rebuild businesses in case of a disaster
What the Small Business Loan Rates Are and When To Pay Them Back
Before you apply for a small business loan, you need to familiarize yourself with the terms of repayment. The interest rates and designated repayment windows differ for each loan type, for example:
| Type of Loan | Interest Rate | Loan Term |
|---|---|---|
| Business term loan | Starting at 6% | Fixed monthly payments over several years |
| Short-term loan | Starting at 8% | Typically one to three years |
| A business line of credit | Range from 8%-24% | Six months to five years |
| Startup loan | Range from 0%-17% | Over ten years |
| Equipment financing | Starting at 7.5% | Three to 10 years (depending on the life of the equipment) |
| Small Business Administration loans | Depends on the loan program | Ten to 25 years |
Where To Apply for a Small Business Loan
When it comes to applying for a small business loan, you have several options. You can request funding from:
- Online lenders
- Commercial or community banks
- Non-profit organizations
- Peer-to-peer (P2P) lending websites
- SBA bank lenders
Regardless of the method, borrowers must present certain financial and legal documents along with the application for a small business loan. You will most likely have to provide:
- Income tax returns (personal and business)
- Bank statements (personal and business)
- Income statement, along with a balance sheet
- Photograph of your driver's ID
- Valid business licenses
- Any commercial lease you may have
- Resume and financial prognosis for your business
DoNotPay Can Help You Secure a Loan for Your Small Business!
The process of getting a small business loan is riddled with paperwork and can quickly become overwhelming. If you are looking for a more streamlined method of acquiring funds for your business venture, sign up for DoNotPay.
Our AI-operated platform will draft your loan request letter in minutes and deliver it to the chosen lender with speed and efficiency. All you have to do is complete the following steps:
- Prepare all the required financial and legal documentation
- Access DoNotPay and select the Small Business Loan Request Letter product
- Answer questions regarding your company and the loan
- Upload the paperwork
Based on your answers and provided documentation, DoNotPay will generate a bulletproof application for a small business loan and file it on your behalf! If you haven’t decided where to apply yet, use our Find Online Business Loan Lender feature to help you with your search!
Don’t Let the Complex Procedures Stress You Out! Rely on DoNotPay and Run Your Business Like a Pro!
DoNotPay has created a plethora of simple-to-use features that will help you run your business the best way possible. Here are some aspects we can help you take care of:
| Registrations | Legal Documents |
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What Else Does DoNotPay Have in Store for Your Business?
You can use our app to resolve many other business-related issues. DoNotPay can help you deal with fake reviews that are ruining the reputation of your business by analyzing the harmful review and figuring out the best way to go about it.
Do you wish to protect the privacy of your clients and prevent their data from being collected while they are on your website? Use our app to file a self-certification request with the Privacy Shield program.
If you need help automating the filing of 83(b) election forms, DoNotPay has the right solution for you and your employees or shareholders! With our app, you will be able to finish the entire process with a few clicks.
Another perk of using our app is that we can help you fax and mail any documents or letters without having to leave your home or office.
DoNotPay will help you handle all your business tasks in the blink of an eye!