Taking out a small business loan can jumpstart your brand new company or give you the funds to maintain or even grow your business to the next level. Either way, it can feel like you're heading into uncharted waters. But, putting aside your fears can have a huge pay-off. According to Fundera, the average SBA loan amount is $107,000 and the average small business bank loan amount is $633,000.
Don't let your intimidation of getting a small business loan cost you massive funding. Getting a small business loan isn't that scary when you have all of the facts at your disposal.
1.Determine Why You Want A Business Loan
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The first step to take when thinking about acquiring a small business loan, is figuring out why you want one in the first place. It's key to know why you need a business loan for multiple reasons. How are you going to know which type of loan and lender can fulfill your needs? A few reasons to apply for a small business loan include:
- Starting a new business
- Growing your business
- Financing equipment or vehicle purchases
- Day-to-day expenses
- Buying another business
- Build your business credit history
2.Pre-assess Your Qualifications For A Loan
Before wasting your time applying for loans that are out of your reach, assess your current qualifications for a loan. This will help you to determine which loan types and lenders will most likely approve your loan, narrowing your search.
How is your credit score looking?
Most people are familiar with a personal credit score, yet many aren't familiar with a business credit score. If your business is brand new, you'll lack a business credit history, so loan administrators will focus on your personal credit score.
If you're unsure about your personal credit score or business credit score, check your credit report using the three major credit bureaus: Equifax, Experian and TransUnion. If there's anything concerning your reports, it's important to resolve these issues to amplify your chance of loan approval.
Do you have the minimum annual revenue?
Most lenders care about your business's annual revenue because they want to ensure you can actually pay them back. Calculate your annual revenue to assess if you meet a lender's minimum annual revenue requirement. Each lender has unique qualifications, but if your annual revenue is at least $100,000, you should be good to go for most small business loans.
3.Determine The Type Of Loan
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There are many loan options for small business owners, but below are 4 options that are pretty common among small business borrowers.
- Term Loans:Term loans are one of the most popular type of loans for small businesses. Small business owners receive a lump sum of cash that is expected to be repaid over a fixed term, while accruing monthly interest on the principal balance. This loan type allows lendees to use their lump sum of cash on a diversity of needs, such as the purchasing of equipment or inventory expenses.
- Small Business Line of Credit: A small business line of credit is comparable to a credit card because borrowers receive a maximum credit limit that can usually be accessed through a checking account. Business owners who have no idea how much funding they may need will benefit from this option because you only withdraw what you need. Plus, you can repay your owed amount, and then withdraw money once again to keep your credit balance low. You're only charged interest for the amount you withdrew, instead of being charged for the entirety of the loan amount like a term loan.
- Small Business Administration Loan (SBA): SBA loans are a perfect match the owner who wants a government-backed loan. These loans entice business owners because of their low-cost, but the application process is known for being excessively long delaying the administration of funding. These loans are great for the business owner who prioritizes low-interest rates and fees over receiving their funds ASAP.
- Equipment Loans: Equipment loans are fitting for the borrower who needs to finance large equipment/machinery/vehicle purchases, but lack the capital to do so. These loans are for purchases that maintain their value, such as office furnishings or laptops. If you can't pay your loan back, your purchases can be held as collateral.
4.Choose Lenders After Comparing Your Options
Before choosing a random lender, shop around to find the best-fit lender. There are a couple of factors to consider. What are the lender's fees? Which lender offers the best APR? How fast will the loan be administered? How large of a loan do they typically offer borrowers with your background?
There are many factors to consider, including the type of lender:
- Banks match the borrower who's been in business for at least two years, has good credit, and the patience to wait for funds. There are several banks to choose from including: J.P.Morgan, Citibank, and Wells Fargo.
- Online lenders are fit the borrower who prioritizes fast funding over low APR rates and higher loan approval rates than a traditional bank. Check out a few of the online lenders that supply small business loans: OnDeck, UpStart, and Credibly.
- Microlenders are an excellent option for borrowers who have a less than stellar credit history, cant receive a traditional loan, or have a new business. A few popular microlenders: LiftFund, Opportunity Fund, and Justine Peterson.
5.Apply For Your Small Business Loan & Submit
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After choosing lenders, it's time to apply! Understanding the application process and requirements is key to approval. Once you understand the application requirements, gather the needed documents. Lenders may require a business plan, tax returns, credit reports, legal documentation, and the purpose of the loan.
After gathering your application documents and filing out the application forms, double check your application. All that's left to do is submit your materials, and wait for a decision. Good luck!
Hopefully after learning 5 steps to getting a business loan, the entire process seems a little less daunting. The only thing left to do is to use the advice and start sending out business loan applications. If you're rejected by a lender, that's OK because you can apply to other lenders or take some time to become a stronger applicant.
Featured image by xavierarnau/Getty Images
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Skylar sees things differently. At the time, she was shooting content on her iPhone. Temi came into the picture with a new perspective, an understanding of tech, and, eventually, a camera. “He doesn't give himself enough credit,” Skylar says. “He wasn't just my tripod. He wasn't just standing behind the camera and going ‘click.’ He was giving advice. He was giving me insight to how I could look at things from a different perspective. And I was like, 'Oh, he’s an artist.' I think it was maybe a heartbeat of that kind of energy of like, ‘Baby, can you take this picture?’ And it turned so quickly into, we're partners. We can work together in a way where we're advancing each other's creative thinking.”
The pair often says they’re two sides of the same coin. Skylar is an Aquarius. She attended art school, paints, and loves poetry. She’s more than happy to let the couple’s management firm and agency, Kensington Grey, handle their admin work. And, she loves to sleep in. Temi, on the other hand, wakes up early. He’s a Virgo. He loves a to-do list and regularly checks in on the couple’s brand partnerships spreadsheet to make sure everything is on track.
Because his storytelling was steeped in his love of technology, he didn’t always think of himself as a creative person. “Where I [am] the dreamer who wants to pluck things out of the sky and spend all day with my head in the clouds, Temi [is] so good at grounding me and helping me figure out how to make things make sense on paper. We just work together in such a complimentary way,” Skylar says.
It’s been more than six years since Brooklyn-based couple Temi and Skylar started dating, and nearly four since they cemented their working relationship. On TikTok and Instagram, the couple’s travel, fashion, and home content regularly rack up hundreds of thousands of views. They’ve worked with brands such as Coach, Aesop, Away, and Liquid IV, bringing their vibrant perspectives to every campaign they execute. Still, nearly two years since both Temi and Skylar committed to full-time content creation and creative directing, the couple says their romantic connection remains their priority.
“We told each other we would much rather go back to full-time jobs and preserve our relationship than to be full-time freelancers, barely getting a night's rest [and] barely kissing each other because we're so busy shooting,” Skylar says.
Working from home can make it hard to separate work from personal life for any entrepreneur. It can be even more challenging when your business partner is also your lover. Temi and Skylar had already used couples therapy as a tool to help them effectively communicate with one another. When they ran into challenges while working together, their therapist helped them set physical boundaries to help combat the issues.
"We told each other we would much rather go back to full-time jobs and preserve our relationship than to be full-time freelancers, barely getting a night's rest [and] barely kissing each other because we're so busy shooting."
“It actually took us doing very specific physical things to create boundaries between work and play in our relationship,” Skylar says. “So, for instance, we will only have conversations about work when we're out of bed or we're at the table or in the office. Initially, when we started, we had to light a candle to say that, 'Okay, this is a space where we're connecting, we’re not talking about work.' We needed really hard boundaries at the top. And then it became a little bit more organic.”
The boundaries have been crucial to implement, especially because the couple began working together so naturally. When the pair first met, Skylar was NY-based a social strategist for BuzzFeed and was using content creation to drive business to her lingerie company. She was shooting her own content. Temi was working for Microsoft in D.C. He’d recently traded in his DJing equipment for a camera. “I've always loved taking pictures,” he says. “Even when I was a kid, my African mother would wake me up at 3:00 a.m. [during a] party, and be like, 'Come take the family picture.'”
Growing up, Temi says he watched his parents support each other and be the true definition of partners. He knew he wanted the same for his own relationship. But, the couple also wanted to make sure they were being financially responsible. The pair didn’t quit their traditional jobs until they’d saved up two years' worth of their cost of living. And, Temi received his Master of Business Administration from New York University with the knowledge that it could either help him advance in his corporate career or be applicable to his business with Skylar.
Temi and SkylarCj Hart @hartbreakToday, they say their working relationship is more of a “quiet dance.” They still implement some of the boundaries they learned in therapy, but they also lean into their natural strengths and deep love for one another. When we speak, Temi has planned a date for the couple to see Princess Mononoke in 4K IMAX and added it to their Notion so they can factor it into their busy schedules. “I fully plan to date for the rest of my life,” he says.
Skylar says the couple doesn’t just wait for date nights to check in with one another, though. This often happens in the mornings, after Temi has made her peppermint tea and poured himself a cup of coffee. When they ask each other how they slept, she says, it’s not just a “nicety.” It’s a genuine question meant to foster connection.
“A lot of it happens during the day in the midst of work. We'll stop and we'll hug. Or we’ll slow dance in the kitchen,” she says. “Sometimes it's hard to set a whole date night when you have 7,000 things going on. So, we must grasp these moments and check in when we can. And I think it's become so organic to us that I actually didn't even realize how often we do it. But all day long, we're like, 'Are you good? I felt like your energy shifted,' because we're best friends, we just know. We just feel it happen.”
What’s better than being in love? Building wealth while doing it. Watch Making Cents here for real stories of couples who make money moves together.
Featured image by Cj Hart @hartbreak