Small Business Loans - How To Get Them Approved?

small business loans how to get loan approved sba lender

Small business loans are easy to avail and are offered by traditional as well as other financial lending institutes. For startups or small enterprises, they act as a fuel in their business growth or expansion, to improvise sales & marketing activities, to conduct research & development, to train employees, hire new human resources, to buy new software or applications to enhance productivity, etc. the list is endless. 

Why Any Business Owner Would Go For A Small Business Loan? 

Working capital is essential for every business irrespective of its size. But it is critical for small business owners as they have very limited capital capacity and always need funds when they start something new or sometimes to cover operating costs to run the business smoothly. You can find different variants of small business loans such as an SBA loan, a bank or credit union loan, a loan from an online lender or a U.S. Department of Agriculture loan that you can easily apply for. 

Generally, small businesses opt for commercial bank loans considering the fact of earning profits from the same. Other money lending sources include public funds, credit unions, and private investors, where small businesses use the accounts receivable or inventory as collateral. Alternatively, a new company can get a bridging loan to help secure the funds they require to start their operations or fulfill unique short-term financial needs.

The key reason why a business owner goes for small business loans are 

• To Infuse Working Capital 
• To Expand Business Operations 
• To Buy Inventory or Raw Material 
• To Buy Equipment 
• To Buy Real Estate 

Types Of Small Business Loans 

Every business needs capital; the reason could be different for different businesses. No matter whether you are a new startup or an established small business with low credit score (personal as well as business) and looking out for low rates with flexible terms & conditions, for such businesses various loan products available in the market. 

SBA Loans 

If you have a strong business profile along with strong credit history then an SBA loan is best for you. Small Business Administration and its associates or partners offer these low-cost loans. You can use them for purchasing equipment, real estate or can use it as working capital. 

Short Term Loans 

If you need cash on an immediate basis then Short Term Loans are ideal for you. All B2C businesses always prefer these loans as the total loan amount is disbursed in one go that can be easily paid in fixed installments or EMIs periodically. But the interest/factor rate is used to determine the borrowing fees. 

Installment Loans 

It is most suitable for small businesses. The total loan amount is disbursed in one go and periodically paid in fixed installments. The current interest rate is used to determine the borrowing fees. 

Business Lines Of Credit 

If you can't predict future financing requirements then it is most desirable for your small business to go with Business lines of credit loan. It is primarily credit lines that can be utilized by the business at any time to withdraw funds as and when needed, without passing through an application process. 

Merchant Cash Advances 

If you want to arrange quick cash for your B2C businesses for short-term needs then this loan is perfect. It is a type of non-loan kind of business financing where a cash advance company buys the future revenue of the borrowing business at a discount in trade for cash up-front. Invoice Financing It is ablest for those B2B businesses that have unpaid invoices. In this, the business's unpaid invoices are used to access funds for the business. 


It is most beneficial for new entrepreneurs, startups, or other small businesses that regularly require funds in a small amount. They process loans through an installment of $50,000 or less. 

Personal Loans For Business 

It is helpful for young entrepreneurs and new startups. In this type of loan borrower's personal profile is assessed as compared to the business profile for loan approval. 

Crowd-Funding & P2P Loans

If your business holds a consumer-friendly product/services or business design then this type of loan can be a great help. Here investors or backers fund your business or business idea. 

Business Credit Cards 

Business credit cards work well for almost all small businesses. Funds are used to meet everyday business expenses as a sort of short term loan option, just watch out for the interest rates on minimum or late payments! 

Commercial Real Estate Loans 

This is used by businesses that have a strong personal credit history. Generally, they are used to buy or develop commercial real estate. 

Why Credit History Or Score Essential For Small Business Loans? 

Nobody likes high-interest rates, and for small business owners, this creates a little distress when they apply for a small business loan. But if you have a good credit score, then you'll be offered a loan with a low-interest rate. Banks or lending institutions always check personal as well as business credit scores and history because a small business doesn't have a good business credit history, thus in that scenario personal credit plays a significant role. A credit score of at least 600 or above is essential to get a business loan approved. 

Types Of Bad Credit Loans 

If you have a bad credit score and credit history and are worried about the loan approval, then don't be. There are different types of bad credit loans are available in the market for businesses who have bad credit scores. 

• Invoice factoring 
• Merchant cash advances 
• Peer-to-peer lending 
• Equipment financing 

Financing or funding is an imperative aspect of every small business enterprise. Whether you are developing your business, investing in sales & marketing, arranging to advertise, managing operational cash flow, expanding business, etc. it's challenging to grow without financing. Opportunely, there are various types of financing or funding choices are available for small business owners who have bad credit scores. 

Types Of Good Credit Loans 

Small business owners' first preference is getting good credit loans because of their strong viability that includes better interest-rates, longer & flexible terms, and economical monthly payments. 

• SBA loans 
• Term loans 
• Lines of credit 

If your business holds a healthy state with financial stability then banks and other financial institutions or lenders easily finance your funding needs. 

How Can You Increase the Possibilities Of Getting Your Small Business Loan Approved? 

For most online small business loans the qualification criteria state that you must be into a business from at least one year and if you want to apply for a bank loan then it must be at least two years. It is quite difficult for any business owner to arrange funds for launching a new product/service or to infuse cash into a growing business entity with a bad credit score. But many easy ways can effortlessly improve your chances of getting approved for a small business loan. 

• Share detailed and complete financial information. 
• Develop a strong business plan or model. 
• Identify and characterize the financing needs. 
• Always keep an eye on alternate lenders. 
• It's good to approach or speak to multiple lenders. 
• Speak to local or small banks. 
• Check how and where you can utilize your money. 
• Thoroughly check your credit report and fix errors, if any. 
• Do an alternate analysis of your payment plan and prepare 2-3 options. 
• Stick to business plans and generate higher revenue as it will make your standing strong and thus improves your chances of loan approval. 

To summarize, while applying for a small business loan it's good to be detailed, organized, document-ready, and well-prepared. You need to be specific towards your requirements i.e. how much money you need, for what purpose it will be used, future business revenue forecasting, and how you have planned for repayment. Many times, if you have conscientiously organized everything then banks or lenders easily approve or chance of getting approved for your small business loan becomes higher.

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