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Five Ins and Outs of How to Apply for a Small Business Loan

How to Get a Small Business Loan in Five Easy Steps

Congratulations! You’re getting your small business off the ground and into a bright horizon. With the resources of a small business loan, you’ll have the adequate funding to maintain a prosperous business. Whether you own a pet franchise, independent business, or are delving into a new start-up—having the financial backing helps.

This article helps summarize the process. There is a lot of paperwork involved in loan application process whether through a bank, credit union, or the SBA. Organization is crucial. You will need to clearly state why your business needs a loan and determine the amount you will need to take out.

Be prepared to answer the following questions:

  • Why are you applying for this loan?
  • How will the loan proceeds be used?
  • What assets need to be purchased, and who are your suppliers?
  • What other business debt do you have, and who are your creditors?
  • Who are the members of your management team?
  • Questions relevant to your personal background.

Organize all Required Documents

Before investing precious time and resources into the application process, first, procure all the documents you will need. This will expedite the whole process.

To start, you will need to check your personal credit and your business’s credit. An SBA 7a loan, for example, is the most common loan for small businesses. For an SBA 7a, you will need a 680+ FICO score. You will need to request a credit report from all three major credit reporting agencies like Equifax, TransUnion, or Experian.

You will also need to develop your business plan. A thoroughly prepared business plan must include a complete set of projected financial statements, including profit and loss, cash flow, and a balance sheet. You will also need to submit personal and business income tax returns from the three previous years.

Some lenders also require business owners to submit legal documents depending on the nature of your business. Be prepared to submit business licenses and registrations, article of incorporation, copies of third party contracts, franchise agreements, and commercial leases.

Review Your Lending Options

For small business loans, there are a variety of lending institutions to peruse through for financing. Do some comparison shopping. Different lenders have different criteria points, interest rates, and financing.

You can choose to apply at a national commercial bank or smaller regional bank. Often small businesses have an easier time getting approved by smaller regional commercial banks. Credit unions are also an option, but you will need to be a member. If this is the case, speak with a loan officer at your local credit union about assessing your business for a small business loan.

There are also state and local economic development agencies that specialize in advancing entrepreneurialism. Non-profit organizations can provide lower interest rates than large banks, or are more willing to aid with small business owners who do not qualify for traditional commercial loans.

Prepare and Polish Your Business Plan

Once you have all the documentation, preparing your business plan will be more streamlined. A business plan is a living document that projects three to five years ahead—configuring how the business will grow revenues via your intended plan of action.

You will need to the following:

  • Projected financial statements
  • Profit and Loss statements
  • Cash flow
  • Balance sheet

From these documents develop your business plan. Use the following checklist to make sure you have included every provisional detail.

Executive Summary

This section describes your business. It should include a mission statement, founding, growth highlights, products and/or services, glimpse of financial information, and a summation of future plans for the next 5 years.

Start-ups and new businesses should treat an executive summary like a pitch. Show you have done the market research,  include your own experience, market gaps, and your vision.

Company Description

The company description expounds on the executive summary. It should include details on your business’s marketplace, an explanation of your products and/or services, analysis of consumers, and competitive advantages your business possesses.

Market Analysis

This segment segues from your company description. A market analysis provides more detail into your market knowledge. This is where you will present research findings applicable to your business.


  • Industry description
  • Target Market and Evaluation
  • Size of Market
  • Market Share Gains
  • Competitive Analysis
  • Regulatory Restrictions

Be thorough. To avoid penetrating questions during your presentation to lenders, answer them all here with a prepared course of action.

Organization & Management

What does your team look like? This section outlines your company’s organization structure, details of ownership, profiles your management team, and qualifications of a board of directors.

Service & Product Line

The emphasis in this description should be on the benefits of your potential consumers and retained customers. Focus on what your business provides that will target customers. Details about product’s life cycle, intellectual property, and all research and development should be included.

Marketing & Sales

How are you planning on driving sales and retaining customers? A comprehensive marketing strategy blueprints growth strategies, distribution, and communication to customers.

Funding Request

This includes your needs for your present request, and for the future. This section shows your intention with a loan and strategic plans for the future.

Whatever you plan on doing with your small business loan—list that here.

Financial Projections

With clear objectives, describe where you believe the financial state of your company will be going forward. Include data from the last five years. If you have not been in business this long, provide prospective financial data.

Visit Local SCORE & SBDC Offices for Guidance

Speaking with experienced executives and business experts will help ease and answer any unknowns you might have before presenting to a lending organization on your personal financing situation. Local Small Business Development Centers, or SBDCs, are part of the small business administration. Many local chapters are on nearby university campuses. You can also explore non-profit SCORE centers which offer free business mentoring from retired executives. If there are no local centers near you, information and advice are offered online.

Think of these aids as continued networking. Establishing a relationship with your local chapters opens the doors to enriching insights from small business owners who have the expertise for success.

Build Your presentation and Make Your Appointment

Once you have determined you are eligible, found a financially beneficial lending organization, and constructed your business plan, it is time to apply.

Take a proactive approach toward the application process. You will want to craft an articulate professional package with a succinct method of delivery. Data should be concise. Deliver summative information in the form of spreadsheets, charts, and graphs to quickly demonstrate your plans and knowledge to the loan officer.

From here you make an appointment and request enough time to present with visual aids. You can use large print-outs, PowerPoints, and props if necessary. If you have done your homework, this should be the easiest step. A presentation will only be as good as the preparation.

Good luck, and for more information small business loans, visit the SBA website.


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