For most small business owners, locating and obtaining funding for startup or growth expenses is an important step along the path to success. But it’s an overwhelming one, which is why many business owners seek out small business loan assistance.
If you’re brand new to business ownership, the business loan process might leave you feeling overwhelmed, with no idea where to start. And even if you’ve been in business for a while and have successfully navigated through loan process previously, you could now find yourself in need of a different type of funding.
Either way, doing your research about the availability of small business funding is critical so that you can avoid wasting time or money. Here are a few steps you can take to locate the kind of small business loan assistance you need.
Where Can You Find Small Business Loan Assistance?
When you need some good, old fashioned advice, nothing’s better than talking to an experienced professional. Look to these local support and mentoring institutions for the answers you need (and to make some great connections along the way).
Chamber of Commerce
Your local Chamber of Commerce is a wealth of information about all things commercial in your area. Think financial institution contacts, market research, demographics, and city and county future building plans just to name a few.
Your local Chamber of Commerce’s website likely has blogs with helpful financial information as well as information about local business groups that meet and facilitate networking.
US Small Business Administration
In addition to funding options for small businesses, the US Small Business Administration (SBA) is committed to supporting new and growing small businesses by offering face-to-face and internet-based counseling services as well as low-cost training for small business owners and entrepreneurs.
Small Business Development Center
As part of the SBA’s commitment to supporting small business development, it has created more than 900 centers at which professionals share their expertise through training and counseling. Each SBDC is built and managed to meet the local business trends and evolving needs of the community in which it serves.
Also created and sponsored by the SBA, SCORE provides free counseling, advice and mentoring for business owners. Interested entrepreneurs and small business owners can access SCORE resources online or take advantage of services in person at one of the 13,000-plus locations across the US. SCORE offers free webinars and workshops on all aspects of starting and operating a small business.
Should You Work With a Loan Broker for Small Business Loan Assistance?
When you begin the search for small business loan assistance, you’ll likely come across the idea of a business loan broker. Just think—the whole process of finding and vetting a lender, then researching and choosing the right funding option, then filling out all that paperwork—it sounds like a chore that would be better for someone else to do for you.
Although there are loan brokers out there who are honest and worth the fee, others will be less than transparent about what they do and how much they charge.
To avoid negative experiences working with a loan broker, be prepared with some specific questions for your first conversation.
A good loan broker should be able to tell you:
- How do they make money or get paid?
- Will they work with any lender or just those who pay them a kick-back?
- Will they give you contact information and can you actually reach them during reasonable hours?
- Will they give you references?
By all means, check those references. A good loan broker can be an invaluable resource, but proceed with caution. You might be better off working with an online lending professional who will be your partner in the search for small business loan assistance.
Researching Your Loan Options
There are two places you’ll want to explore for small business loan assistance: brick-and-mortar banks and online business loan marketplaces. As you approach any of these lenders, keep in mind that your personal financial history and qualifications may limit your options.
For this reason, a little advance research can go a long way toward making certain that your final decision won’t only solve your current financial need, but also serve you well in the long run.
Small Business Loan Assistance for Bank Loans
If you already have a solid relationship with your local bank, that may be a good place to start. This will allow you to meet face-to-face with the individual who will approve or reject your loan application.
For the most part, those products include:
- Term loans. Likely the most familiar of all business loan products, term loans offer a lump sum amount of funding up front, which then accrues interest over time according to a standardized rate. Repayment is made according to a set, regular schedule—usually monthly, and typically over a period of 1 to 5 years.
- Business lines of credit. Often described as a hybrid between a credit card and a traditional business loan, a business line of credit is a “revolving” pool of funds established by the lender with a maximum credit limit. You can draw from the pool of funds for nearly any business purpose and in any amount, paying interest only on the amount you have withdrawn at any given time.
- Equipment financing. Useful for business owners with any need to purchase computers, commercial kitchen appliances, or large machinery, equipment financing is an especially attractive loan option because it allows the equipment being purchased to serve as collateral on the loan. The amount and term length of equipment loans is typically dictated by the value expected lifetime of the equipment, so you’ll need to extensively research the equipment you’re purchasing before you choose to pursue this loan option.
Who can provide small business loan assistance for you here? Your personal banker will be uniquely qualified to offer small business loan assistance within the scope of the products they have available.
Small Business Loan Assistance for SBA Loans
Working together with intermediary bank lenders, the US Small Business Administration offers a variety of small business loan assistance. These loans are intended to provide access for individuals who would otherwise be unable to qualify for funding.
SBA loans are offered at a more affordable cost than other traditional business loans. In fact, they’re some of the most affordable loans available to small business owners. Because SBA loans are partially guaranteed by the government (up to 85%), they’re attractive to lenders and small business owners.
The three most popular SBA offerings include:
- The SBA 7(a) loan: Used for inventory expansion, real estate acquisition, and additional working capital
- The SBA CDC/504 loan: Used for purchasing major fixed assets such as land, real estate, or long-term equipment
- The SBA Microloan: This program partners with community-based, non-profit, lenders to provide small business borrowers with loans ranging from $500 to $50,000.
The SBA loan application and approval process can be lengthy as well as convoluted, often taking a few months. This could mean that the time between application and when you actually receive the funds is even longer.
Although there aren’t technically hard-and-fast requirements for credit profile or revenue, to be approved for an SBA loan, your personal or business credit score will typically need to be very healthy (620+). These are really competitive products, after all. You might also be required to provide collateral as well as a down payment.
Who can provide small business loan assistance for you here? Though the SBA loan application process can be arduous, the Small Business Administration fortunately offers borrowers a wide range of services to help you navigate your options and the necessary paperwork. Try one of these SBA resources for small business loan assistance:
- SBA District and Regional Offices. Available in nearly every major US city along with some rural locations. These offices offer in person training, counseling, and mentoring on the loan application process as well as other business assistance. Find your closest district or regional SBA office here.
- Small Business Development Centers. Most public university campuses across the US have an SBDC office, which is available to local business owners as a resource to help navigate business ownership as well as provide small business loan assistance.
- The SBA Online Learning Center. Can’t make it to an in-person office? The SBA’s online learning center offers tons of high-quality, unbiased courses and information to walk you step by step through financing and growing your business.
- LenderMatch. New from the SBA, LenderMatch connects borrowers with local SBA intermediary lenders based on your funding needs and qualifications.
Small Business Loan Assistance for Online Lending
You can find the other avenue for small business loan assistance online. In response to the increasingly difficult qualification requirements of traditional bank loan products, online, alternative lenders have stepped in to fill the credit gap.
Small business owners can now find the same offerings online that used to be only inside a bank. The search and business loan application process can be completed with the guidance and expertise of an online lending specialist. Additionally, the application and processing time frames are typically much shorter than those of traditional banks.
In fact, not only can the online lending marketplace offer many of the same products that banks do they also have a wide selection of other financing options to meet a variety of small business funding needs.
In addition to offering term loans, business lines of credit, equipment financing loans, and SBA loans, online marketplaces offer the following options:
- Invoice financing. Ideal for businesses facing cash flow challenges while awaiting payment on invoices, invoice financing allows for the advance of a majority percentage of your business’s outstanding invoices up front while retaining the smaller percentage in reserve. As your customers pay their invoices, you repay the financing company and they pay you the remaining percentage, minus their fees.
- Short-term loans. Short-term loans function just like traditional term loans but have a much shorter term of repayment. The lifetime of these loans is most often between 3 and 18 months and payments are due on a weekly or even daily basis. Because the credit requirements for short term loans can be a bit more flexible, these loans can be a good option for business owners who are struggling to qualify for other forms of small business loan assistance.
Who can provide small business loan assistance for you here? With so many options to choose from, connecting with the right online lender and loan product for your business’s needs can be a daunting task. Your best bet here? Connect with a specialist at online loan marketplace, where you can investigate the pros and cons of various lenders and loan products.
Preparing Your Business Loan Application
Each lender and each loan option will require different information in the application packet, but these are some standard items that will be required for a good majority of business loan applications:
- Past 1 to 2 years personal and business income tax returns
- 3 to 6 months of business bank statements
- Business organization documents to prove ownership
- Profit & Loss statement
- Business balance sheet
- Business overview and history
Although some application processes will seem overly complicated, it’s essential that you provide accurate and thorough information. The more complete your initial package, the quicker approval will be.
Keep in mind that there’s no need for you to muscle through the small business loan process on your own. Whether you apply through your local bank or an online marketplace, you’ll have access to a professional loan specialist who’ll guide you through every step of your loan application.
Small Business Loan Assistance Is Available—If You Know Where to Look
We’ve identified that research is the key to finding small business loan assistance. Choose the right lender by checking their lending process and references. Research multiple types of funding options to identify the one or ones that fit your business needs. Then use one of those trusted lenders, whether local bank or online lending specialist, to apply for a few of the loan products your research identifies.
Making connections and networking with small business professionals can give you the additional business assistance you may need. Finding support agencies in your community can open doors to not only small business loan assistance but perhaps even identify new business prospects.
Meredith Turits is a contributing writer for Fundera.
Meredith has worked as a writer and editor for more than a decade. Drawing on her background in small business and startups, she writes on lending, business finance, and entrepreneurship for Fundera. Her writing has also appeared in the New Republic, BBC, Time Inc, The Paris Review Daily, JPMorgan Chase, and more.