First things first: If you have a clean public record and a strong credit score you’ll have an easier time getting a loan — but don’t let past mistakes stop you from pursuing your dream. It doesn’t hurt to have business or management experience, but strong ideas, good planning and passion can help you overcome gaps in your experience. Depending on the loan, you might need to provide some form of collateral.
WHO DO I HIT UP FOR A LOAN?
Typically, small business loans come from the government (through a lender approved by the U.S. Small Business Administration), a traditional bank or credit union, or a private investor. Some nonprofits and community organizations offer microloans to local entrepreneurs.
WHAT KIND OF LENDER IS RIGHT FOR YOU?
Your lender will depend on the type of business. Are you going to open an online store where you are the only employee, or a brick-and-mortar store with many employees? Each lender has different criteria. Before you look for a lender, you need to clearly define and communicate your ideas in a business plan.
HOW MUCH CAN I GET?
According to the U.S. Small Business Administration (SBA), small business loans can range anywhere from $5,000 to $5 million, with the average amount around $135,000. How you use the money depends on your projected costs and needs as outlined in your business plan.
HOW DO I QUALIFY FOR A SMALL BIZ LOAN?
In order to apply for a small business loan, you’ll need a slew of documents:
- Your resume, and the resumes of any key business partners, showing what qualifies you to run the business.
- Financial statements, which show your current cash flow as well as your projections for future profits.
- A business plan, which explains your products or services and your plans to grow your business.