How to Get a Commercial Loan: The Step-by-Step Guide

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Getting a Commercial Loan Overview

Whether you need to fund a major business expansion project or simply cover day-to-day working capital, every business owner needs outside capital to grow.

Although some entrepreneurs turn to investors for capital, and some look into their own pockets to get financially off the ground, many turn to small business loans when they need the financing. This being said, however, getting a commercial loan isn’t always easy—especially for newer business owners.

Luckily, we’re here to help.

In this guide, we’ll explain everything you need to know to learn how to get a commercial loan–breaking the process down step-by-step.

The Ultimate Guide to Getting a Commercial Loan

How to Get a Commercial Loan in 5 Steps

So, you’re wondering how to get a commercial loan.

Odds are, you’re at the absolute beginning of your search process.

Without a doubt, this can be an overwhelming time, especially if you’ve never applied for a commercial loan before. This being said, however, the process can be made much more manageable if you break it down into individual steps and take things one step at a time.

Let’s get started.

Step 1: Determine why you need a loan.

If you’re trying to determine how to get a commercial loan, the first step in the process is planning.

After all, going into a commercial loan search blind is never a good idea. Therefore, before you even start thinking about which types of loans you might need, or which business lenders you should work with, you’ll want to take a full step back and ask yourself:

“Why do I need this loan?”

Pinpointing why you need the funds will help point you in the direction of which loans to pursue—saving you time applying to commercial loans that really aren’t a fit.

This being said, not only will you want to understand this for your own purposes, but when you actually apply for a commercial loan, it’s very likely that your small business lender will ask you to prepare a statement explaining why you need the funds and how you intend to use them.

Ultimately, although you might be looking to get a commercial loan for any number of reasons, here are some of the most common reasons to keep in mind:

Step 2: Decide which loan type and lender is right for your business.

Now that you’ve completed the first step, you know why you need financing. The next step to figure out how to get a commercial loan is deciding which loan type and lender is best for your business.

This being said, although commercial financing has been traditionally difficult for small businesses to access, the rise of alternative lending has changed the playing field—opening up many more options for all kinds of businesses.

With this in mind, here are some of the most popular business loan solutions you might consider:

Step 3: Evaluate your commercial loan requirements.

After you think you’ve determined the type of commercial loan that’s right for your financing needs, you might be wondering: How do you qualify for a commercial loan?

Ultimately, the qualifications that you’ll need to meet will largely vary based on the type of loan and the lender.

This being said, however, before you take the time to evaluate every single option, and put together an application for many different types of business loans, it’s important to get a sense of what you might qualify for based on the details of your business.

Doing so can save you time and effort spent applying to commercial loans that don’t fall within your qualifications.

With this in mind, let’s break down the three most common commercial loan requirements that lenders will use to evaluate your business.

Step 4: Prepare your application.

Once you’ve evaluated your business’s commercial loan requirements—your credit score, time in business, and annual revenue—you’ll have a much better sense of where to focus your application efforts.

As you’ll find, many lenders, especially online lenders, will lay out their minimum business loan requirements on their website—so even before applying, you’ll have a sense of whether or not your business will be able to qualify.

This being said, the next step to learning how to get a commercial loan is preparing your application. Just like the commercial loan requirements you have to meet, however, much of the application process will vary based on the individual lender and product.

Say, for instance, you’re applying to an SBA loan. You’ll need a lot of documentation and information prepared for your loan application.

Short-term loans, on the other hand, come with a much simpler application process—many short-term lenders have streamlined online applications, where you can complete your business loan application in a matter of minutes.

With this in mind, however, here is some of the documentation and information you can expect to need to provide in order to get a commercial loan:

    • Business and personal bank statements
    • Business tax ID
    • Business and personal tax returns
    • Business debt schedule
    • Business financial statements, such as profit and loss statement and balance sheet
    • Business legal documents (e.g., articles of incorporation, business licenses and permits, proof of ownership, commercial lease, franchising agreement)
    • Use of loan statement
    • Business plan
    • Personal resume and experience

    For more information on required documents, refer to our commercial loan documentation checklist.

Step 5: Close your loan.

At this point, we’ve reached the last step of our process explaining how to get a commercial loan.

After you’ve gathered the necessary documents and submitted your application, you’ll be waiting on a decision from the lender. Generally, alternative lenders can issue an initial approval within a few days, depending on the product, whereas bank and SBA loans will require much longer timelines.

This being said, once you (hopefully) receive approval for a lender, or multiple lenders, you’ll want to take the time to evaluate and compare offers. Ultimately, the best commercial loan for your business will not only be the one that meets your needs, but also the one that’s most affordable.

Once you’ve decided on the offer you’d like to move forward with, you’ll work with the lender to close your loan. During the closing process, you’ll want to make sure you review the business loan agreement thoroughly, ask any questions you may have, and perhaps even review the document with a financial advisor or business attorney.

Finally, after you’ve signed all the necessary documents and completed the closing process, you’ve successfully obtained a commercial loan. Therefore, all that’s left to do is wait for the funds to hit your bank account. Again, the timeline for this process will vary based on the lender and the product you’ve chosen.

Frequently Asked Questions

Bottom Line

As you can see, although learning how to get a commercial loan may seem overwhelming at first, it’s much more manageable when you take the process step-by-step.

This being said, it’s very likely that you’ll need to get a business loan at some point throughout the life of your business—so once you’ve gone through the process the first time, it will only become easier in the future.

Plus, if at any time you need assistance or advice, you always have the option to reach out to your business advisors—like your accountant or lawyer—as well as loan experts to help you in getting a commercial loan.

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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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