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Monday, July 15, 2024

How to Get a Business Loan

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If you’re a business owner, there may be times when you need an infusion of cash to cover business operations, buy equipment, make upgrades, or to start the business in the first place. That’s why it’s important to know how to get a business loan in case you ever need one.

Can You Get a Business Loan With No Business Revenue?

While most business loans want to see consistent business revenue as one of their eligibility requirements, there are some loans like microloans that are geared toward startups that won’t yet have that track record of earnings. Another option is to find an alternative lender that offers loan programs that offset risk by asking for collateral or having higher credit standards.

What Credit Score Is Required for a Business Loan?

Business loan credit score requirements vary by lender. For instance, business loans for bad credit might only require 500 and above. There are also business loans with no credit check. At the other end of the spectrum, some loans may have higher minimum credit scores depending on which loan type.

Do Business Loans Require Collateral?

Not all business loans require collateral, but some do. Usually, if you’re putting up collateral, it’s to compensate for not having a high enough credit score or being in business for a short time. Going with a collateral loan (or secured loan) may allow you to get a lower interest rate than an unsecured loan. Some businesses will use their inventory as collateral during warehouse financing.

What Qualifies as a Small Business?

While some may think of small businesses as solo practitioners or mom and pop shops, the Small Business Administration has a far broader interpretation. To qualify as a small business, a company cannot exceed standards for average annual revenue or average number of employees, depending on the industry. For example, soybean farmers are considered to be a small business up to $2.25 million in annual revenue, while flooring contractors are small up to $19 million in annual revenue. New car dealers can employ up to 200 people and still be considered a small business, while short-line railroad operators can hire as many as 1,500 workers and still be considered small.

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