How to Get a Business Loan in 2024

Last Update: October 2024

Written by Leeron Hoory
Tech and Finance Specialist

Reviewed by Noa Kaufman
BusinessHeroes Staff

A business loan can help cover expenses you need to grow your company. There are many different loan options and lenders available.

Read on to learn the process of researching and applying for a business loan.

Decide What Type of Loan You Need

There are different types of loans for different purposes including short-term loans, long-term loans, equipment financing, microloans, and working capital loans.

There are also multiple different types of lenders including banks, microlenders, online lenders and the Small Business Administration (SBA). To narrow down the type of loan you need, start by asking yourself a few basic questions:

What do you need the loan for? Some examples include equipment, daily operations, purchasing a vehicle, marketing, expansion, or renting an office space.
Are you making a one-time purchase or do you intend to use the loan for ongoing expenses? A one-time loan is paid back with interest and can be used for fixed expenses. Alternatively, you can apply for a business line of credit, which is more suitable for funding day-to-day expenses.
How much money are you looking to borrow and for how long? This will also determine the type of loans you will qualify for.

Determine If You Qualify for a Business Loan

Lenders will look at several business loan requirements to determine your eligibility and the loan amount you qualify for, including:

Credit score

Your personal and business credit score is one factor nearly every lender will consider. A good to excellent score (690 minimum) will likely be required for traditional lenders. If you don’t meet this, there are alternative loans to consider, though keep in mind they will likely have higher interest rates.

Time You’ve Been in Business

Six months to one year is the minimum length of time most lenders will require you to have been in business. Traditional banks like the Bank of America will typically require that you’ve been operating for two years.

Business Annual Revenue and Loan Terms

Most lenders have a minimum annual revenue required to qualify for loans. For example, to qualify for a Small Business Administration (SBA) loan you’ll need a minimum annual revenue of $50,000 to $100,000 or more, depending on the specific SBA program. On the other hand, some lenders have higher requirements. Bank of America requires a minimum annual revenue of $250,000.

If you don’t qualify for these options, consider microloans or alternative online lenders that may have different requirements. For loans under $10,000, you might find that applying for a business credit card is a better fit.

Another important factor of your eligibility is how much your business earns relative to the loan you’re applying for. Lenders will likely want to see a debt service coverage ratio (DSCR) that’s higher than 1. For example, if your annual income is $100,000, your loan wouldn’t be higher than $100,000.

Compare Business Loan Options

Applying for a business loan will cause a small temporary drop in your credit score. But the good news is that you can apply for multiple loans within a two-week period without additional impact on your credit score. Before you apply, consider all the different options for business loans available from each lender you’re interested in.

For instance, SBA offers multiple loan programs designed for the needs of different businesses, such as equipment and machinery or invoice financing. The best way to get a business loan often involves comparing options that best match your financial profile and loan purpose.

“The whole idea of SBA loans is to help businesses who otherwise couldn’t get funding, get funding,” Carolyn Katz, a mentor with SBA-sponsored nonprofit Score, told the Wall Street Journal.

Gather Your Loan Application Documents

While every lender has different requirements, here’s a list of documents you will likely need to provide when applying for a loan:

Business plan
Expense sheet
Financial projections
A profit and loss statement
Business and personal tax returns
Relevant business licenses and permits
Bank statements
Business debt schedule
Collateral documentation
Personal identification, including government-issued ID.

How to Apply for a Business Loan

Once you’ve gathered the documents you need, it’s time to apply. Each lender will have a different application process. For online lenders, for example, you’ll likely be able to complete your application online. For banks, you may need to schedule an appointment over the phone.

For example, to apply for a business loan with Chase Bank, you’ll need to speak with one of their specialists at a local branch.

To make the process easier for yourself, gather all your documents in one folder on your computer, so you’ll be able to easily fill out the applications with any of the multiple documents the lenders request.

Review Loan Offers

Once you receive loan offers, compare them more closely. Here are some of the factors to think about:

Rates: The loan rate is one of the most important factors of a loan, as it will determine how much you’ll end up needing to pay in the long term. Consider the difference between fixed rates—which don’t change for the duration of the loan—and variable rates.
Fees: Every lender charges different fees for different reasons, so before you commit, consider maintenance fees, late payment fees, origination fees and prepayment fees. Consider your specific circumstances and which fees may most directly apply to you.
Term length: Consider how long the loan lasts and when repayment starts.
Calculate total cost: You can use a loan calculator to compare the total cost of the different loan offers.
Ask how hard is it to get a business loan?: Consider the credit requirements and business revenue minimums each lender may have.
When in doubt, speak with an advisor: If you’re not sure which loan to choose, a business advisor, mentor, or accountant can help you evaluate the offers and make a decision.

Apply for a Business Loan That Applies To Your Needs

When exploring how to get a small business loan, it’s crucial to align financing with your business goals. Start by understanding loan types and how they fit your needs, whether it’s for expansion, equipment, or daily operations. Once you've asked yourself, “How do I get a business loan that's right for me?” compare lenders based on interest rates, terms, and eligibility.

By gathering financial documents and ensuring your business is financially prepared, you’ll strengthen your application and improve approval odds. Choosing the right loan sets your business up for sustainable growth, supporting both immediate needs and future success.

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About Leeron Hoory: Tech and Finance Specialist

Leeron, based in New York City, writes about technology and finance for top publications like Forbes Advisor, Quartz, and Popular Mechanics. With her expertise, Leeron simplifies complex subjects, guiding you through the latest trends and strategies to boost your business.