Commercial Loan Application: What You Need to Know

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Mapping Out the Commercial Loan Application Process

So, you want to dive into filling out your commercial loan application.

The decision to seek a business loan is certainly an exciting one—it’s easy to get caught up in it all. However, it’s crucial that you approach your commercial loan application with an level head and a game plan.

What’s the best way to approach this process?

With lots of preparation, and a step-by-step guide mapped out before you dive into it—and that’s what we’re here for. We’ve compiled the ultimate guide to making the very most out of the commercial loan application process.

Stick with us, and you’ll have a comprehensive game plan for submitting the very best commercial loan application you can.

Choosing Your Commercial Loan Type

First and foremost, you need to do a bit of prep work before you dive into filling out your application. The very first step you need to take to prepare yourself for the commercial loan application process is making sure you choose the right type of commercial loan for you and your business.

Let’s take a look at the best types of commercial loans for you to choose from.

The Best Types of Commercial Loans

Though you’d typically have a lot of commercial loan types to sift through, we’ve listed out 5 commercial loan products that are particularly useful for small business owners like you.

Here are the top 5 commercial loan types for small business owners to consider.

SBA Loans

First up on our list, SBA loans are term loans that are partially guaranteed by the Small Business Administration, a government entity most often referred to as the SBA.

What’s does it mean to be partially guaranteed, you ask?

Well, the partial guarantee that the SBA provides just means that they back up part of your loan, and in the case that you’re not able to repay your loan, the SBA will provide the lender with the amount of the loan that they guaranteed.

One common misconception that many business owners have is that the SBA lends directly. It’s an easy mistake to make—they are called SBA loans, after all. However, it’s important to note that the SBA doesn’t do any actual lending itself and that they only guarantee loans that are provided by certain SBA-approved lenders.

That said, this guarantee goes a long way—in fact, the partial guarantee that the SBA provides not only makes lenders more likely to lend to small businesses, it also gets them to lend to small businesses with better terms. This is the case because the partial guarantee mitigates much of the risk that a lender would take on otherwise lending to a small business. As such, small businesses can access higher loan amounts, lower interest rates, and longer repayment terms through SBA loans than they can with any other commercial loan option.

That said, the commercial loan application process for SBA loans will be one of the most thorough and lengthy of all your options. We’ll cover the details of the SBA application process later, but it’s important to keep in mind when making preliminary decisions on which type of funding you’ll opt for.

Term Loans

Another great commercial loan option for small businesses is a traditional term loan. This funding type is one of the most straightforward option out there for small businesses.

In fact, even though you might not know to call it a term loan, you’re probably already familiar with this type of commercial loan. Proceeds from a term loan come in the form of a lump sum that you’ll pay back, plus interest, with regular—most often monthly—payments.

Other than SBA loans, term loans offer some of the most ideal terms available on the market. However, just like SBA loans, term loans will also be pretty difficult to qualify for because of their attractive to terms. We’ll cover details on what it takes to qualify for a term loan later, but, again, this is an important detail to keep in mind while deciding which commercial loan type to apply for.

Business Lines of Credit

Next up on our list of the best types of commercial loans for small businesses, business lines of credit are valuable funding sources for small business owners to have in their back pocket.

Business lines of credit function much like business credit cards. Business lines of credit extend businesses a credit limit from which they can draw funds as needed. Just as with business credit cards, with business lines of credit, you’ll only have to pay off what you end up spending from your credit limit.

However, with business lines of credit, you won’t be spending your funds with a designated, physical card. In fact, your proceeds from your business line of credit will come in the form of an account deposit, rather than the non-cash credit that cards provide.

Additionally, business lines of credit will often come with lower APR’s than business credit cards, though they won’t be able to offer many of the add-on perks that business credit cards are able to.

Invoice Financing

Yet another great type of commercial loan for small businesses is invoice financing. This funding type lets small business owners use their outstanding invoices as a form of collateral that secures their business financing. When a small business is waiting on an invoice, they can receive an advance of up to 90% of that invoice’s worth through invoice financing.

The wait invoice financing works is that after you’re advanced a portion of your outstanding invoice—let’s say, for example, you receive $900, or 90% of an $1,000-dollar invoice—you’ll be charged interest for every week that the invoice is outstanding, After your customer fulfills the invoice, then the lender will subtract the interest from the remaining 10%, or $100, of the invoice, and you’ll get the remaining amount.

Because invoice financing is a form of secured funding, you’ll be able to access pretty stellar terms, even if your business’s qualifications aren’t quite where most lenders will want them to be.

Short-Term Loans

Last up on our list of the best commercial loan types for small businesses is the short-term loan. Short-term loans function a lot like a condensed version of the term loans that we just learned about. Just like traditional term loans, short-term loans will come in the form of a lump sum that you’ll pay off, plus interest, over time.

However, in contrast to term loans, short-term loans will come with much smaller loan amounts, much higher interest rates, and much shorter repayments terms. Not to mention, you’ll likely have to make daily or weekly repayments with short-term loans rather than the monthly repayments that term loans will come with.

All in all, short-term loans will be harder to pay off, because you’ll have to pay them off quickly. However, because they’ll be accumulating interest for less time than longer-term loans, short-term loans will generally have a lower overall cost of capital. This commercial loan type is a great option for small business owners who are less-qualified or need funding fast.

The Top Lenders

Best Lenders for Term Loans

These are the top lenders that are offering term loans.

    Fundation

    The first on our list of top term loan lenders is the online lender Fundation. This commercial lender offers a term loan that’s essentially an equivalent in terms to a traditional bank loan. Their term loans can range in size from $20,000 to $500,000 with repayments terms from 1 to 4 years and rates ranging from 7.9% to 28.9%.

    The main difference between Fundation term loans and bank term loans?

    Fundation’s technology-enabled process allows for an expedited commercial loan application process. As such, you can get funded with Fundation in as little as 2 business days. Meanwhile, banks can take up to a month to fund your business.

    Funding Circle

    Next up on our list of term loan lenders is the peer-to-peer lending site Funding Circle.

    They offer term loans of anywhere from $25,000 to $500,000 with rates that can dip as low 5.5% or go as high as 27.9%. Plus, with repayment terms no shorter than a year and as long as 5 years, your monthly repayments will be relatively low and manageable.

    Lending Club

    The last of the top term loan lenders for you to consider is the credit marketplace Lending Club. This industry leader offers term loans to small businesses that can range in size from $5,000 to $300,000. Their rates can be anywhere from 5.9% to 25.9%, and their repayment terms can range from 1 to 5 years.

    One distinguishing feature to note about Lending Club is that they’re willing to underwrite industries that other lenders often aren’t willing to lend to. If you’re in an industry like real estate, auto sales, or even lending itself, and you’re looking for a term loan, then LendingClub might be the best bet for you.

Best Lenders for Business Lines of Credit

These are the top lenders for business lines of credit.

    BlueVine

    If you’re looking for a business line of credit to fund your business, then consider the online lender BlueVine. This commercial loan lender provides business lines of credit of as low as $6,000 and of up to $150,000 to business owners who need working capital for their day-to-day expenses. These revolving lines of credit can carry terms of either 6 months or 1 year, and their rates can range from 18.20% to 62.40%.

    Plus, BlueVine can fund your application within 24 hours, so if you’re looking for a quick influx of working capital, this commercial lender is a great option.

    Headway Capital

    Another great option for business owners searching for a business line of credit is the commercial lender Headway Capital. This lender offers short-term, revolving lines of credit that can be anywhere from $5,000 to $50,000 and can last anywhere from 1 to 2 years, making it one of the longest lasting lines of credit available to small businesses.

    And though these lines of credit come with relatively expensive interest rates of 40% to 80%, their longer terms and monthly (instead of weekly or daily) payments will make payments far more manageable.

    Kabbage

    Another top commercial lender that offers business lines of credit to small businesses is Kabbage, a commercial lender who specializes in business lines of credit. This lender offers business lines of credit as small as $2,000 and as large as $150,000 with term lengths from 6 to 12 months. Their interest rates—which they charge based as a flat monthly fee— can be anywhere from 1.5% to 10% of your remaining loan amount.

    Plus, with no draw fees and one of the quickest funding speeds on the market, Kabbage should definitely be a top contender for any small business looking to find a quick and affordable business line of credit.

    OnDeck Capital

    One last lender on our list of top business line of credit providers is OnDeck Capital.

    This lender offers 6-month lines of credit that can range from $5,000 to $100,000 with rates from 13.99% to 36%. Plus, you’ll be able to get an offer back from them within a few hours. With affordable terms and quick funding speeds, OnDeck is yet another great option for business owners hoping to fund with a business line of credit.

Best Invoice Financing Companies

These are the best companies that offer invoice financing.

    BlueVine

    If you’re looking to finance an outstanding invoice that your business is waiting for, then you can look to BlueVine for this funding type, as well.

    BlueVine’s invoice financing can have terms as quick as 1 week or as long as 12 weeks, depending on your invoice’s repayment term. Their invoice financing product comes with rates that are set up as weekly discount rates from .04% to 1%.

    The best part?

    BlueVine can finance invoices anywhere from $30,000 up to a whopping $2.5 million.

    Fundbox

    Another great option for financing your outstanding invoices is Fundbox, a lender who specializes specifically in invoice financing. With Fundbox, you can finance an invoice of anywhere from $100 to $100,000, and you’ll always have a term of 3 to 6 months to repay it.

    Fundbox’s interest rates are also expressed as weekly discount rates for every week you invoice is outstanding—you’ll have to pay them 0.5% to 0.7% of your invoice’s worth for every week that it’s outstanding

Best Lenders for Short-Term Loan

These are the top lenders of short-term loans for small businesses.

    OnDeck Capital

    Looking for a short-term loan? OnDeck Capital can also help you out with that.

    OnDeck’s short-term loan product can range in amount from $5,000 to $250,000 with terms from 3 months to 2 years and rates from 8.5% to 79% APR. While these rates might seem expensive, remember that APR’s are tricky measurements with short-term loans—remember that APR’s are annual percentage rates, so if you have a loan with a term on the shorter side, even if you’ve got a high APR, you could end up paying way less in total loan cost.

    As such, it’s helpful to think of rates on short-term loans as factor rates—they’ll be more helpful in understanding just how affordable short-term lending can be. For instance, OnDeck’s short-term loans will come with factor rates from 1.07 to 1.39.

    LoanBuilder, a PayPal Company

    Another great commercial lender that provides short-term loans to small businesses is LoanBuilder, a PayPal company.

    This PayPal working capital loan option offers loans of anywhere from $10,000 to $500,000 with term lengths from 3 months to a year and with factor rates from 1.025 to 1.19.

    Even more, unlike many of its short-term competitors, LoanBuilder’s short-term loans will come with weekly, rather than daily, payments.

    The Business Backer

    The Business Backer is yet another top commercial lender that offers short-term loans to small businesses across the nation.

    Their short-term funding can range in amount from $5,000 to $200,000 with terms from 4 months to 18 months and with factor rates from 1.10 to 1.30.

    One of the Business Backer’s key features that’s important to note is that they’re one of the few lenders who is willing to fund seasonal businesses, so if you’re hoping to fill in the financial gaps for your seasonal business, this lender could be your best bet.

Making Sure You’re Eligible

Now that you’ve taken the time to look through the best lender options for your desired loan type, it’s crucial that you take a moment to check that you’re eligible for the lender before you dive into their commercial loan application.

Many commercial lenders will establish minimum eligibility requirements so that you can check them before sinking time and effort into an application for a loan that you otherwise might not have any idea you’ll qualify for.

Let’s take a look at each of the top commercial lenders’ minimum requirements before you decide which commercial loan application to fill out.

    BlueVine

    • A personal credit score of at least 530
    • At least 3 months in business
    • At least $40,000 in annual revenue

    Celtic Bank

    • A personal credit score of at least 640
    • At least 2 years in business
    • At least $50,000 in annual revenue

    Fundation

    • A personal credit score of at least 660
    • At least 1 year in business
    • At least $100,000 in annual revenue

    Fundbox

    • All you’ll need is at least 6 months in business

    Funding Circle

    • A personal credit score of at least 660
    • At least 2 years in business

    Headway Capital

    • At least 6 months in business
    • At least $50,000 in annual revenue

    Kabbage

    • A personal credit score of at least 550
    • At least 1 year in business
    • At least $50,000 in annual revenue

    LendingClub

    • A personal credit score of at least 620
    • At least 2 years in business
    • At least $75,000 in annual revenue

    OnDeck Capital

    • A personal credit score of at least 500
    • At least 1 year in business
    • At least $100,000 in annual revenue

    SmartBiz

    • A personal credit score of at least 640
    • At least 2 years in business
    • At least $75,000 in annual revenue

    LoanBuilder, a PayPal Service

    • A personal credit score of at least 550
    • At least 9 months in business
    • At least $42,000 in annual revenue

    The Business Backer

    • A personal credit score of at least 550
    • At least 1 year in business
    • At least $300,000 in annual revenue

Gathering Your Documents for a Commercial Loan Application

What’s the next step after verifying that you’re eligible the lender you’ve chosen?

It’s time to actually enter the commercial loan application process. Though it will vary from lender to lender, this process will likely require a good bit of paperwork.

Let’s run through the lenders to see what paperworks they require of borrowers when they fill out their commercial loan application.

    BlueVine

    If you think BlueVine is right for you, all you’ve have to put together in a commercial loan application is the following:

    • Accounts receivable aging (for invoice financing)
    • 3 months business bank statements
    • General information about the business (business address, phone number, business DBA, and Tax ID Number)
    • Personal information about the business owner applying (phone number, email, personal address, social security number, date of birth, ownership percentage).

    Celtic Bank

    Remember, Celtic Bank offers SBA loans, which is a fairly intensive application process.

    • Equipment List Form
    • Business History Form
    • Form 4506T
    • Management Resume for All Guarantors
    • Articles of Organization
    • Operating Agreement/By-laws
    • SBA Form 1919 for All Guarantors
    • Certificate of Business Entity
    • Current Mortgage, Proof of Ownership, of Lease Agreement
    • Landlord Subordination Agreement (if applicable)
    • Member Resolution Authorizing Loan
    • Voided business check
    • Copy of your driver’s license
    • Home Office Pictures

    Fundation

    Fundation offers a longer-term, larger product, with lower interest rates. For that reason, they’ll only work with very qualified borrowers. They’ll need to see:

    • 3 months business bank statements
    • 2 most recent business tax returns
    • Business debt schedule
    • Year to date financials
    • Voided business check

    Fundbox

    As it’s a invoice factoring company, Fundbox has a fairly simple commercial loan application. You’ll need:

    • Outstanding accounts receivable for your business customers
    • An accounting software such as QuickBooks Online, QuickBooks Desktop, Freshbooks, Harvest, Wave, Xero, SageOne, InvoiceASAP, or Clio

    Funding Circle

    Funding Circle works with more qualified borrowers. To vet your loan application, they’ll need to see the following:

    • 6 months business bank statements
    • Most recent personal tax return
    • 2 most recent business tax returns
    • Your balance sheet for the past year (unless you submit your business tax returns).
    • Your profit & loss statement for the past year (unless you submit your business tax returns).
    • Business debt schedule

    Headway Capital

    Headway is an accessible, short-term loan. To apply, you’ll only need:

    • 3 months business bank statements
    • Online bank identification and password

    Kabbage

    Kabbage has one of the easier commercial loan applications out there. You won’t really submit anything, just:

    • No real paperwork required—you’ll just connect your business checking account.

    Lending Club

    Lending Club is one of the longer-term lenders, and thus will have a more extensive underwriting process. Lending Club is one of the tougher lenders to qualify for, so if your Lending Club loan is denied, check out other lenders with less strict qualification requirements. However, their initial commercial loan application will likely only be:

    • 3 months business bank statements
    • Your most recent business tax return

    OnDeck Capital

    OnDeck has a simple loan application, only requiring:

    • 3 months business bank statements (for a short-term loan)
    • Voided business check
    • Copy of driver’s license

    SmartBiz

    Offering SBA loans, SmartBiz has a more intensive application process than other types of business loans. You’ll likely need all of the following:

    • 3 most recent personal tax returns
    • 3 most recent business tax returns
    • Your balance sheet for the past year
    • Your profit & loss statement for the past year
    • Articles of Organization
    • Operating Agreement/By-laws
    • Business license
    • Insurance – General Liability
    • Insurance – Business Personal Property
    • Lease Agreement (if applicable)
    • Landlord Subordination Agreement (if applicable)
    • Certificate of Good Standing
    • Voided business check
    • Copy of your driver’s license

    LoanBuilder, a PayPal Service

    LoanBuilder’s application is slightly more complicated than other short-term lenders. You’ll need:

    • 2 Years of Business Tax Returns
    • Merchant Interview
    • 2 Vendor References
    • Landlord Reference
    • Year to Date Financial Statement

    The Business Backer

    Like LoanBuilder, The Business Backer also has a little more intensive a commercial loan application. You’ll likely have to put together:

    • 4 months business bank statements
    • 1 year of business tax returns (if loan amount is $50,000 or more)
    • 1 year of profit & loss statements
    • Most recent balance sheet (if loan amount is $75,000 or more)
    • Most recent 4 months of credit card statements
    • Landlord reference
    • Franchise reference (if applicable)
    • Customer references (if business has volatile revenues, small customer base, or one customer comprises at least 50% of revenue)
    • Proof of Ownership
    • Certificate of Good Standing
    • Voided business check
    • Copy of driver’s license

The Bottom Line for Your Commercial Loan Application

There you have it—your ultimate guide to preparing your commercial loan application.

Though it may seem like a lot of information to take in, the more you narrow down your options based on your loan type, your lender, and your eligibility, the more tailored your pool of potential lender will be, and the more efficient your commercial loan application process will be.

Ready to really get started?

Let’s get your commercial loan application submitted together.

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Vice President and Founding Editor at Fundera

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. She launched the Fundera Ledger in 2014 and has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending. She is a monthly columnist for AllBusiness, and her advice has appeared in the SBA, SCORE, Yahoo, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, MyCorporation, Small Biz Daily, StartupNation, and more. Email: meredith@fundera.com.
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