Question 1

How much can my business borrow?

Accepted Answer

Borrowing capacity depends on multiple factors including annual revenue, credit score, time in business, and loan type. The key is calculating what payment amount your cash flow comfortably supports. Most lenders recommend keeping debt service below 1.25x coverage ratio, meaning your business generates $1.25 for every $1 in debt payments. Start by determining sustainable payment levels, then work backward to establish appropriate borrowing amounts.

Question 2

How long does it take to get a business loan?

Accepted Answer

The timeline varies dramatically by lender and loan type. Based on the FDIC's research: Online lenders take 24 hours to 7 days for smaller amounts, traditional banks take 2 to 4 weeks from application to funding, credit unions take 1 to 3 weeks with existing relationship, SBA loans take 30 to 90 days due to government requirements, and alternative options, such as Figure's HELOC can fund in as few as 5 days for qualified borrowers.

For the fastest funding, prepare all documentation in advance, choose lenders with automated underwriting, and consider pre-approved credit lines for future needs.

Question 3

How hard is it to get a business loan?

Accepted Answer

Difficulty depends on your qualifications relative to lender requirements. Approval rates vary significantly by lender type.The strongest applications feature credit scores above 700, two-plus years in business, consistent revenue growth, and clear loan use plans. Newer businesses or those with credit challenges face more difficulty and might need to explore alternatives or improve their qualifications before applying. Building strong banking relationships, maintaining detailed financial records, and demonstrating consistent cash flow significantly improve approval odds.

Question 4

Can you get a business loan with bad credit?

Accepted Answer

Yes, but options become limited and expensive. Alternative lenders work with credit scores as low as 500, though rates might exceed 30% to 40% annually. Building business credit should be a priority. Consider secured business credit cards, vendor credit lines, and credit builder loans to improve scores while meeting immediate needs through alternative financing.

Question 5

Business loans vs. personal loans: What's the difference?

Accepted Answer

Business loans are designed for commercial purposes and typically require more documentation, but they offer larger amounts, longer repayment terms, and potentially lower rates for established companies. Personal loans are typically easier to obtain with less paperwork, provide faster funding, and are limited to smaller amounts with shorter terms. In short, business loans fit larger, long-term needs for established companies, while personal loans are better for quick, smaller expenses.

What is a business loan? Types, requirements, and how to apply

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What is a business loan? Types, requirements, and how to apply

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