Taking out a small business loan can jumpstart your brand new company or give you the funds to maintain or even grow your business to the next level. Either way, it can feel like you're heading into uncharted waters. But, putting aside your fears can have a huge pay-off. According to Fundera, the average SBA loan amount is $107,000 and the average small business bank loan amount is $633,000.
Don't let your intimidation of getting a small business loan cost you massive funding. Getting a small business loan isn't that scary when you have all of the facts at your disposal.
1.Determine Why You Want A Business Loan
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The first step to take when thinking about acquiring a small business loan, is figuring out why you want one in the first place. It's key to know why you need a business loan for multiple reasons. How are you going to know which type of loan and lender can fulfill your needs? A few reasons to apply for a small business loan include:
- Starting a new business
- Growing your business
- Financing equipment or vehicle purchases
- Day-to-day expenses
- Buying another business
- Build your business credit history
2.Pre-assess Your Qualifications For A Loan
Before wasting your time applying for loans that are out of your reach, assess your current qualifications for a loan. This will help you to determine which loan types and lenders will most likely approve your loan, narrowing your search.
How is your credit score looking?
Most people are familiar with a personal credit score, yet many aren't familiar with a business credit score. If your business is brand new, you'll lack a business credit history, so loan administrators will focus on your personal credit score.
If you're unsure about your personal credit score or business credit score, check your credit report using the three major credit bureaus: Equifax, Experian and TransUnion. If there's anything concerning your reports, it's important to resolve these issues to amplify your chance of loan approval.
Do you have the minimum annual revenue?
Most lenders care about your business's annual revenue because they want to ensure you can actually pay them back. Calculate your annual revenue to assess if you meet a lender's minimum annual revenue requirement. Each lender has unique qualifications, but if your annual revenue is at least $100,000, you should be good to go for most small business loans.
3.Determine The Type Of Loan
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There are many loan options for small business owners, but below are 4 options that are pretty common among small business borrowers.
- Term Loans:Term loans are one of the most popular type of loans for small businesses. Small business owners receive a lump sum of cash that is expected to be repaid over a fixed term, while accruing monthly interest on the principal balance. This loan type allows lendees to use their lump sum of cash on a diversity of needs, such as the purchasing of equipment or inventory expenses.
- Small Business Line of Credit: A small business line of credit is comparable to a credit card because borrowers receive a maximum credit limit that can usually be accessed through a checking account. Business owners who have no idea how much funding they may need will benefit from this option because you only withdraw what you need. Plus, you can repay your owed amount, and then withdraw money once again to keep your credit balance low. You're only charged interest for the amount you withdrew, instead of being charged for the entirety of the loan amount like a term loan.
- Small Business Administration Loan (SBA): SBA loans are a perfect match the owner who wants a government-backed loan. These loans entice business owners because of their low-cost, but the application process is known for being excessively long delaying the administration of funding. These loans are great for the business owner who prioritizes low-interest rates and fees over receiving their funds ASAP.
- Equipment Loans: Equipment loans are fitting for the borrower who needs to finance large equipment/machinery/vehicle purchases, but lack the capital to do so. These loans are for purchases that maintain their value, such as office furnishings or laptops. If you can't pay your loan back, your purchases can be held as collateral.
4.Choose Lenders After Comparing Your Options
Before choosing a random lender, shop around to find the best-fit lender. There are a couple of factors to consider. What are the lender's fees? Which lender offers the best APR? How fast will the loan be administered? How large of a loan do they typically offer borrowers with your background?
There are many factors to consider, including the type of lender:
- Banks match the borrower who's been in business for at least two years, has good credit, and the patience to wait for funds. There are several banks to choose from including: J.P.Morgan, Citibank, and Wells Fargo.
- Online lenders are fit the borrower who prioritizes fast funding over low APR rates and higher loan approval rates than a traditional bank. Check out a few of the online lenders that supply small business loans: OnDeck, UpStart, and Credibly.
- Microlenders are an excellent option for borrowers who have a less than stellar credit history, cant receive a traditional loan, or have a new business. A few popular microlenders: LiftFund, Opportunity Fund, and Justine Peterson.
5.Apply For Your Small Business Loan & Submit
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After choosing lenders, it's time to apply! Understanding the application process and requirements is key to approval. Once you understand the application requirements, gather the needed documents. Lenders may require a business plan, tax returns, credit reports, legal documentation, and the purpose of the loan.
After gathering your application documents and filing out the application forms, double check your application. All that's left to do is submit your materials, and wait for a decision. Good luck!
Hopefully after learning 5 steps to getting a business loan, the entire process seems a little less daunting. The only thing left to do is to use the advice and start sending out business loan applications. If you're rejected by a lender, that's OK because you can apply to other lenders or take some time to become a stronger applicant.
Featured image by xavierarnau/Getty Images
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Daye Covington Kicks Her Twist Out Up A Notch With A Voluminous Updo
“I wanted to create a style that was super cute but also easy to pull together, so I went with a puff and tendril combo! It's a style that can be done on freshly washed curls or one that can be done on old hair. [It’s perfect for] when we're short for time but want to add a little razzle-dazzle to our hair before a special occasion. It's very versatile!”
“I would love to dye my hair back to blue! It was my favorite hair color, but unfortunately, my 9-5 now prohibits unnatural hair colors. I'm pushing it with this dark plum color, but I look forward to the day where I can transition into a new stage of life and go back to blue. In the meantime, I'm focusing on length retention. I've been doing well for 2022 and have had no major cuts so I'm hoping to stay consistent with my routine in 2023.”
Follow Daye on Instagram @dayelasoul
Ambrosia Malbrough Made Magic With Poppin’ And Defined Finger Coils
“[Finger coils] is a style that I don’t do often, it takes much more time than my usual wash and go. But that extra time put in makes it extra special and so worth it. The results are beautiful. It’s a style that offers many days of wear, too!”
“[Earlier this year] I did my 4th big chop. This time around hit different as a mom of two. I don’t always have the extra time on my hands to put into my hair, so the short ‘do has been convenient. I’ve realized that not all wash days are created equal even if I use the same products. However, my 4c coils are loving the products I'm using now”
“Since I’ve been having my hair dyed, I’m looking forward to trying Shea Moisture’s new Mongongo and Jojoba Oils High Porosity Moisture Replenish Hair Masque. I am currently growing my hair out and plan on having fun with more highlights and a new shape - possibly a shag cut in 2023!”
Follow Ambrosia on Instagram at @brosiaaa
Jasmin Moses Shows The Secrets To Her Jaw-Dropping Curly Ponytail
“I love doing a sleek ponytail with my baby hairs laid to a T! It helps so my hair isn't in the way when I am cooking and running errands, but it's still snatched to provoke anyone in the room to stop me to say 'girllll your hair is laid!'. I like to add a little razzle dazzle by adding my cute, naturally curly ponytail extensions. It elevates the look perfectly for the holidays.”
“It took me from my freshman year of college to now, almost seven whole years, to know what works for my hair. I love protective styles like wigs and braids because my hair thrives when I don't mess with it. When I leave my hair alone, it grows the best, so I love taking off my wig when I get home, oiling my scalp and putting my bonnet on for bed! When I do wear my natural hair out, what helps me maintain the health of my hair is to get in a rhythm with my hair. [I do] my wash days on Sunday, wear it in a wash n’ go all week, and repeat the next Sunday.”
“My 2023 hair goal is to get back to my 2021 hair length! Recently, a hairstyle damaged my hair causing me to lose 4 inches in length, which was not fun. So I’m working on getting [my hair] back to its original health and keep growing from there! I am also looking forward to trying the Shea Moisture Curl Enhancing Smoothie as a one-product wash n’ go! I hear such great things about it and I think it will give me hold while also keeping my hair lightweight and voluminous. I’m also excited about the Coconut & Hibiscus Defining Styling Gel and Edge Gel.”
Follow Jasmin on Instagram @slimreshae
This film was written through the lens of the often complicated relationship between mothers and sons. However, it isn't your typical movie about urban Black motherhood. No one gets shot, has a drug addiction, and if you ask me, Inez De La Paz (Teyana Taylor’s character) is a ‘shero’; she saves the day, or at least Terry’s life (her son).
This multilayered film touches on the challenges faced while establishing a life following a prison sentence, the flawed NYC foster care system, motherhood, marriage, love, the relationship between a father and son, and Black NYC neighborhoods at the onset of gentrification.
"There's a lot of pain in it, and in order to express pain, there has to be a love that comes with it. So I felt like the movie was a love letter to Black women but a heartbreak letter to New York City…. We contributed so much to the city and made it the special place that it is," said Rockwell. I asked myself, 'How do I reconcile the fact that this place that I love and that is home to me never loved me?'
Teyana Taylor and Aaron Kingsley Adetola.
Photo courtesy of Focus Feature Films
Both Rockwell and Taylor are New York natives, Rockwell is from Queens, and Taylor is from Harlem. The pair agreed they directly related to the lead character, Inez. During our conversation, Taylor explained how we could all connect with Inez. "Inez is within us from being judged or considered difficult for your strength, for your voice, for your tone, no matter how right you are, you're wrong because you're too loud… When you minimize yourself, it's an issue. You're not enough, and when you maximize yourself, it's too much," she said.
According to Rockwell, Taylor auditioned for the role and earned it fair and square, "Nobody can take away from the fact that she earned this role in all the right ways. I think it's great to have that cherry on top. The fact that she's a Harlem girl and that this is a movie about protecting her neighborhood not only what it means to us New Yorkers but what it means to black identity and history in general," she said. "Not only are we honoring Harlem, [but] she is [also] a part of that history that we are trying to protect. I'm really proud of that as well. This person who is a part of this historic neighborhood gets to be the one leading the torch of this role."
We all know Taylor as the uber-talented singer, dancer, actress, fashionista, entrepreneur, artist, wife, and mother. She seems to do it all so effortlessly, but Taylor described the role as therapeutic. It allowed her to put down that superwoman persona while filming on set. "The easy part about this role was that I'm already a mom, so I'm naturally nurturing… In some ways, Inez became very therapeutic for me because it was the only time that I could actually be weak and turn off my strength, and cry and let out all of the things I was battling," the "Rose in Harlem" singer revealed.
Director A.V. Rockwell
Photo courtesy of Focus Feature Films
After watching Taylor master the leading role of this complicated story, it's not absurd to think she may be awarded extensively for her portrayal of Inez. Taylor told me she's ready for everything to come but isn't looking to get too comfortable while soaking up the likely inflow of accolades, "I'm ready. I think it's everything that I prayed for. I think this is God saying ok, here you go… I'm blessed, and I'm grateful, and I just want to continue to just keep working hard and not get too comfortable. Stay hungry, stay the hustler that I am…this is really only just the beginning."
It's not every day we get to see a film with a Black woman starring in a leading role. Furthermore, it's not common to see a Sundance Film Festival Grand Jury Prize-winning movie directed by a Black woman. It's no secret that diversity in Hollywood is uncommon, and the aforementioned are all the more reasons we should visit theaters this Friday to see A Thousand and One.
Not only is this film amazing storytelling, but the production of this film helps to move the needle of diversifying Hollywood and creating spaces for Black women in the film industry forward.
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Feature image by Arturo Holmes/Getty Images for Focus Features
