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Everything You Need to Know About Applying for a Business Loan


Are you trying to start your own business? If so, you have a lot of work on your hands, especially when it comes to acquiring the necessary finances. According to Fundera, slightly less than half of small businesses have their financing needs met, but a business loan service can help. There are several steps involved in applying for a business loan. Use this guide as a way to get started.

Common Questions

Why Apply for a Business Loan?

There are many reasons why a business might apply for a business loan. Applicants may be starting a business from scratch and need the funds to get it off the ground. Some people need additional working capital to expand an existing business. Business expansion may include recruiting and hiring new talent, buying commercial property, offering additional services, or moving to a new location.

For example, a business that only sells products may decide to expand to include services. After enough sales and an understanding of the market, a wine shop may decide to expand into providing wine tours and tastings. The right business loan can help the business expand as needed.

Does your existing business have lingering debt you want to manage better? Like a home mortgage, you can apply for a loan to refinance your business debt.


Where Do You Go for a Business Loan?

Once you're ready to apply for a business loan service, you have a few different places you can go to. Check your local banks and credit unions to see what their interest rates are. Some online lenders and SBA lenders may be able to provide a business loan. Regardless of who your business loan provider is, expect to provide a list of documents to complete the application, including a business plan, tax returns, business license, articles of organization, and profit and loss statements.

What Types of Business Loans Are Available?

There are many different types of business loans available to entrepreneurs. You may wish to apply for an SBA Loan, Term Loan, Equipment Financing, or Business Line of Credit.

SBA stands for the Small Business Administration of the United States. Since it focuses on funding for small businesses, it comes with more flexibility, better rates, and lower down payments compared to other options. To qualify for an SBA loan, your business must operate within the United States or one of its territories. You must have already spent some of your time and money operating your business. The industry that you operate in will also affect your eligibility for getting SBA loan funding.

Instead of a term loan, you may prefer access to a business line of credit. A business line of credit works similarly to any other credit. You can withdraw or spend whatever amount from your pre-approved funding as needed. As long as you keep your business credit in good standing, you can have it for the lifespan of your business. You'll normally apply for a business line of credit at a bank.

Based on your industry, you may want to update existing equipment. Industries like construction, manufacturing, and agricultural work often involve large machinery. A loan can help you get funds to buy or rent the equipment you need.

How Do I Get Approved?

If you're relying on a business loan to get your business idea up and running, you want to do what you can to ensure approval. People are often denied business loans due to bad credit history or no credit history at all. Your personal credit history can be just as important as your business credit history. If you're just starting your business, your personal credit history will be all you have on your record when you apply for a business loan service. Prepare by checking your credit history, credit reports, and credit score and see what you can do to improve it.

Whenever you apply for a bank business loan, some form of collateral is needed to secure a loan. This collateral can include something physical such as a house, land, or a car.

Before any business loan service agrees to help you with funding, they need to see that you have a profitable business model that can continue to grow. Different lenders have different criteria when lending out funding, so make sure you do your research before you decide which one to use.

What You Need

Business Plan

Your business plan incorporates what your business is about. On this plan, you'll write out the goal of your business or expansion. Explain in further detail how you plan to accomplish those goals and the general time frame that you expect to do so. A business plan is always good to have, whether you're planning to apply for a loan or not. Having a solid business plan also comes in handy when marketing and networking to have a strategic relationship with other business partners.

The business plan should be structured with certain elements. You must include an executive summary, a business overview, a sales and marketing strategy, a financial plan, as well as your operations and management detail. The point of the business overview is to explain what your business is and its place within your industry market. Go into further detail about how you plan to run your business on a day-to-day basis when you craft the operations and management section. The sales and marketing strategy is self-explanatory as you'll simply go into detail about your marketing and promotional techniques. If part of your marketing strategy involves attending industry conferences and running regular TV or radio ads, a business loan can help fund that.

Articles of Organization or Incorporation

The Articles of Organization or Incorporation may remind you of the Constitution, but it's not very complicated. This part of your business loan application is the legal document used to represent a limited liability on the state level. Your business will pay a fee to your state when you file your official articles of organization.

Profit and Loss Statement

To qualify for a business loan, your provider must understand exactly how much revenue your company is pulling in and your overall expenses. There's a profit and loss template that you can use to fill the information in. Your statement should cover info based on the time frame of a year, a month, or a quarter. Accounting for business expenses includes anything related to your overhead, such as the cost of a commercial property lease, business taxes, items of depreciating value, debts, property loss from theft, and so on.


Tax Returns

Expect to present copies of your business tax returns for at least the last year. Depending on where you're applying for your business loan, you may need to show more previous years of tax documents. If you have a bookkeeper or accountant, they're a good source to go to for more information.

There's nothing like owning your own business or expanding upon one that you have. It's hard to do that without access to the right funding. However, many institutions can help you after conducting proper research and getting your paperwork in order. Use this guide as a way to ensure you can get the business funding that you need so that you can take your business ideas to a new level. Contact Chemung Canal Trust Company today for more information.