Business loans can help you get the money to expand your business to pay employees and pay for other expenses. Before you apply, make sure you understand how loans work and what kind of documentation you’ll need to submit to your lender. Be aware of how long the process will take and any costs you may be charged.

Common uses of business loans

A business loan can help pay for unexpected expenses, like the damage to your office chair or the COVID-19 pandemic. There may be times when you need to borrow funds to finance the cost of an investment that is not necessary such as upgrading or replacing technology, purchasing manufacturing equipment, or renovating a store. Some lenders offer lines of credit that allow you to draw funds when needed and with a limit and interest only charged on the amount that is used.

Eligibility requirements and application process

You will be required to provide specific information about your business including the official name of your business, its tax ID number as well as any financial documents. These could include business plans, proposals and profits and loss statements, as well as the names and Social Security numbers of those who hold 20% to 25 percent or more of your company. Some lenders require that you’ve been in business for a minimum of one year, while other lenders will accept startups, or do not have any time-in business requirements.

A mentor or advisor can help you navigate the business loan process. The organizations like SCORE have a network of volunteer business mentors who offer free or low-cost assistance to small businesses and startup founders. Find a local chapter and meet an advisor in person.

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