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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How To Apply For a Business Loan in 5 Steps

Updated on:
Content was accurate at the time of publication.

Getting a business loan is overwhelming, but the right funding can get your fledgling company off the ground or let you open a second storefront. Follow these five steps to get started. 

Answer the following questions to determine what kind of business financing you should consider.

How do you plan to use the funds?

  • Starting a business: If you’re just getting your business up and running, you may find it hard to find financing. But there are loans for startups that don’t require you to have years of business experience or established revenue.
  • Manage short-term expenses, like payroll or inventory: For a quick money fix, working capital loans and working capital lines of credit can help keep your business running. They can be used to cover shortages for payroll or to purchase extra inventory during your busy season.
  • Buying property: If you need to buy, build or renovate property for your business, consider a commercial real estate loan. Financing amounts go up to $5 million, with terms as long as 25 years.
  • Financing a restaurant: Opening a restaurant has its own unique set of challenges. Restaurant financing can help you with everything from a new stove to a complete remodel.
  • Purchase new equipment: Equipment financing could cover the entire cost of buying business equipment, such as computers, vehicles or large machinery.

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How often do you need funds?

  • One-time funding: Term loans provide an upfront lump sum of cash, helping you tackle more significant purchases, expansions or renovations.
  • Ongoing funding: Business lines of credit offer flexible financing, allowing you to withdraw what you need when you need it.

How much do you need to borrow?

The amount you want to borrow can help narrow down your business loan options. Microloans range from $500 to $50,000, while an SBA 504 loan can reach up to $5.5 million.

If you are considering a first-time business loan, aim for a lower amount so you can keep up with payments and build your business credit.

How quickly do you need the funds?

The time it takes to process your application and receive your funds varies by lender and loan type. For example, SBA loans have comparatively lower interest rates, but funding may take two months or longer.

An online, alternative lender could be better for emergency business expenses since some offer same- or next-day funding. However, these fast-turnaround loans usually have higher rates than traditional banks or SBA lenders.

Each lender has specific business loan requirements, often outlined on their website. In general, you can expect lenders to review the following criteria when applying for small business financing:

  • Credit score: For the best interest rates, you typically need a FICO Score of 670 or higher. Consider checking your personal credit score before applying. You’ll also want a business credit score above 80. Build business credit by opening accounts with vendors and paying off invoices promptly.
  • Time in business: You typically need to be in business for six months to one year to qualify for an online business loan. Traditional banks, however, often require at least two years. New companies can consider small business startup loans.
  • Annual revenue: Minimum requirements can be as low as $36,000 and go up to $480,000. If your revenue is lower, consider applying for business credit cards or microloans.
  • Collateral and/or personal guarantee: Secured business loans reduce a lender’s risk because they require collateral, like equipment. If you default, the lender can repossess it as payment. A personal guarantee might also be required, allowing a lender to seize your personal assets if you fail to repay the debt.
  • Repayment terms: Most lenders limit your loan to 30% of your annual revenue. Some lenders require weekly or even daily repayments, so review your business budget in advance to ensure you can manage the payments. Use LendingTree’s business loan calculator to estimate your potential borrowing limit.

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Banks, credit unions and online lenders offer various types of small business financing. Here are some types of lenders to consider, including details on how each type works.

Traditional banks

Traditional banks offer a range of small business products, including term loans, commercial real estate loans, lines of credit, business credit cards and SBA loans.

While traditional banks tend to offer the most competitive business loan interest rates, they usually have stricter criteria and a longer application process than alternative lenders.

SBA lenders

The U.S. Small Business Administration (SBA) partners with lenders to offer affordable financing for small business owners. Interest rates are capped based on loan amount and whether you pick a fixed or variable rate.

The most popular SBA loan is the SBA 7(a) loan, which funds up to $5 million for general expenses. If you want to finance major assets, like real estate, the SBA 504 loan can provide up to $5.5 million — the amount guaranteed by the SBA. However, some lenders offer amounts of $20 million or higher.

Low-income, women, veteran and minority entrepreneurs might be eligible for up to $50,000 with an SBA microloan.

Government lenders

The federal government works with lenders to provide low-cost funding for small business owners. In addition to SBA loans (mentioned above), the USDA offers business loans.

The USDA’s Rural Microentrepreneur Assistance Program offers loans up to $50,000 with a fixed interest rate and a term of up to 20 years. To qualify, your business must have 10 or fewer full-time employees and operate in a rural area.

Online lenders

Online business lenders, also alternative lenders, utilize digital underwriting technology to approve or deny business loan applications with record speed. If you can’t gain approval from a traditional bank, you might have better luck with an alternative lender since they usually look at factors beyond credit scores and time in business.

However, online lenders rarely offer rates as low as traditional banks, so you can expect to pay more for the flexibility.


A microloan can help startups, low-income businesses or those with a damaged credit history launch or expand their business. Nonprofit organizations and government agencies typically fund microloans, providing up to $50,000 with flexible terms, low interest rates and minimal fees.

Some popular microloan lenders include Accion Opportunity Fund, Grameen America, Kiva and LiftFund.

See Your Small Business Loan Options

  • Business plan. A strong business plan outlines your company’s mission and goals, including financing and marketing strategies. This reassures lenders that you’ll put their money to good use.
  • Business licenses. Each state has different requirements for business licensure. Make sure all required documents are up-to-date before applying for business financing.
  • Financial documents for the business. Your lender may use your bank and income statements and balance sheets to confirm your company’s annual revenue.
  • Personal financial statements. Your and your business partners’ personal financial information can help lenders determine your overall creditworthiness for a business loan.
  • Personal and business tax returns. Personal and business tax returns are needed to show your overall net profit. Eligible business partners will likely need to provide this information as well.
  • Articles of Incorporation, bylaws or operating agreement. You may need to provide these legal documents depending on your business entity.
  • Building lease. If applicable, have any building leases on hand, including your monthly payment.


How an executive summary can help you get a business loan

An executive summary is a three- to five-page document outlining your business or project’s needs. You should also include recent revenue and profit numbers, current market dynamics and your overall growth plan for the next one to three years.

The more details you can include in your executive summary, the better. You want lenders to see your business as well organized and stable, with the potential to grow.

Applying for online business loans is often quick and automated — you may even receive immediate approval. However, traditional banks may require you to visit a physical branch to apply.

Consider asking a colleague or your local Small Business Development Center (SBDC) to review your application before submitting it. Having a polished loan application can help avoid delays in the financing process.

Your lender may also need additional information, such as:

  • Personal details for all business owners, such as name, date of birth, Social Security number
  • Business name or DBA name
  • Business street address
  • Phone number
  • Type of business
  • Date the business was established
  • Business tax ID number
  • Annual net profit
  • Number of employees (if applicable)

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Here’s what to consider when choosing the best small business loan:

  • APR and Interest rates. The annual percentage rate (APR) is how much the loan will cost you each year, including interest rates and fees. It’s one of the best metrics to use when deciding between lenders. You’ll also want to consider whether the interest rate is fixed or variable — fixed rates may be easier to budget for, but variable rates may be lower. 
  • Fees. Double check all fees related to the loan, including origination fees, late charges and prepayment penalties. Add these to the loan amount to ensure the total cost is worth it.
  • Terms. Consider how long you’ll have to repay each loan and whether or not your repayments start immediately. A longer loan term typically means lower payments, but you end up paying more in interest over the life of the loan.
  • Funding speed. If time is of the essence, you may need to consider how long it will take for funds to hit your account.


Beware of scams

Some lenders offer no-credit-check business loans or guarantee approval before submitting any documentation. Such loans often come with high fees and unfavorable terms. Look for signs of predatory lending and read small business lender reviews before proceeding.

  Clean up your credit

It’s crucial to dispute any errors on your credit report before submitting a loan application. While the process varies by credit agency, most investigations finish within 30 days. Consider working with a credit repair company if you need additional assistance.

  Establish a relationship with a lender

Building a relationship with a financial institution can improve your chances of getting a business loan. Consider applying for small business financing at your current bank or open a business checking account with a desired lender. Some lenders even offer rate discounts or rewards when banking members get a business loan.

  Offer collateral

Collateral reduces lender risk since your lender can seize your collateral to recoup its losses if you default. If your company is new and you don’t have business assets yet, you could pledge personal assets, such as home equity or a retirement account.

  Shop around for the best deal

Many lenders allow you to enter basic details to see estimated rates and terms, typically resulting in a soft versus hard credit check. You can even submit multiple applications within a 14-day window without drastically impacting your credit score — often called “rate shopping.”

While small business loans can help take your business to the next level, not everyone can meet the eligibility criteria. Here are some alternative ways to get business funding.

  • Small business grants: You can apply for small business grants through the federal, state or local government or a private entity like a foundation or corporation. Grants provide free money but are often very competitive.
  • Business credit cards: Business credit cards are convenient for financing everyday expenses, like low-cost inventory and supplies. However, compare interest rates when considering business credit cards versus business lines of credit since credit cards typically have higher rates. Plus, carrying a monthly balance on your credit cards could negatively impact your credit score.
  • Crowdfunding: Raise funds from your customer base using crowdfunding platforms like GoFundMe for business. While crowdfunding platforms generally don’t have business requirements, they typically take a percentage of donations for their services.
  • Friends and family: Obtaining money from a generous friend or family member can save you from hard credit inquiries and high interest rates. However, you may compromise your relationship if you don’t repay the loan. Be sure to outline all expectations in a written agreement if you take this route.
  • Personal loans for business: Yes, you can use personal loans for business purposes. Personal loans are typically easier to get than business loans, though loan amounts may cap at $50,000 with higher APRs. Additionally, you can’t claim interest on personal loans as a business tax deduction.

Most lenders require some form of business revenue before they take a risk on you. However, some lenders offer “no-doc” business loans, requiring less documentation than traditional business loans. For example, you might not need to provide proof of revenue if you have a credit score of 680 or higher.

There are startup business loans with no collateral where certain lenders prioritize credit scores, expected cash flow and a personal guarantee.

Although no-collateral business loans can help in a pinch, they tend to come with less attractive rates and terms. You will likely find more competitive business loan offers if you can wait until your business is more established with a steady cash flow.

Credit score requirements vary greatly based on the lender and loan type. Some lenders disclose minimum credit score requirements on their website, helping you determine your eligibility before completing the application process.

Here are some typical personal credit score requirements for a small business loan:

  • Bad credit business loan: Can range from 500 to 625.
  • SBA business loan: Varies, but having a score of 680 or higher can improve your chances of approval. The SBA also uses the FICO Small Business Scoring Service (SBSS) for 7(a) loans. The current minimum score is 155.
  • Alternative lenders: Can range from 500 to 625.
  • Traditional banks: While most traditional banks don’t disclose credit score requirements in advance, scores below 670 are considered fair or poor. You’ll have a better chance of securing the best rates for your business loan if your score is 740 or higher.

Your lender may also consider your business credit score, generally measured on a 100-point scale. Scores below 50 are considered high risk, whereas scores of 80 or higher are more favorable.

Business owners with a good credit score (670 or higher) are more likely to qualify for the most competitive interest rates on business loans. If you have a limited credit history, consider a bad credit business loan — with minimum credit score requirements as low as 500.

Some lenders tend to place less emphasis on creditworthiness if your business has a steady stream of revenue and you can offer collateral, such as equipment or real estate. However, be prepared to pay a higher interest rate as a tradeoff for getting a business loan with a poor credit score.