Small business loans are a type of financing specifically designed to help small businesses grow and succeed. They can be used for a variety of purposes, including expanding your business, hiring new employees, or buying inventory.
There are many different types of small business loans available –
1. Short-term loans:
These loans are typically used for small, one-time expenses such as equipment purchases or emergency repairs. They have terms of 12 months or less, and can be paid back in a lump sum or through regular installments.
2. Medium-term loans:
These loans are larger than short-term loans and have terms of 2-5 years. They can be used for things like expanding your business or making major renovations. The payments are usually made monthly, and the loan can be paid back in a lump sum at the end of the term.
3. Long-term loans:
These loans are designed for long-term investments, such as purchasing real estate or expanding into new markets. They have terms of 5 years or more, and the payments are usually made monthly.
4. SBA loans:
These loans are guaranteed by the Small Business Administration and can be used for things like expanding your business, hiring new employees, or buying inventory. They have terms of 7-10 years, and the payments are usually made monthly.
When choosing a small business loan, it’s important to compare interest rates, fees, and repayment terms to find the best deal for your needs. You should also consider whether you want a fixed-rate or variable-rate loan. Fixed-rate loans have interest rates that stay the same throughout the life of the loan, while variable-rate loans have rates that can fluctuate.
Rules for small business loans –
1. The business must be small as defined by the SBA.
2. The business must be for-profit.
3. The business must be based in the United States.
4. The business owner must have a good credit history.
5. The business must be able to show a need for the loan and how it will be used.
6. The business must have a solid business plan.
7. The business owner must be willing to put up collateral for the loan.
8. The business owner must be willing to sign a personal guarantee for the loan.
9 . The interest rate on the loan must be reasonable.
10 . The terms of the loan must be reasonable.”
Documentations –
1. A small business loan application form
2. A small business plan
3. Personal financial statements for all owners of 20% or more of the business
4. Tax returns for the business and all owners of 20% or more of the business for the past three years
5. Business financial statements for the past three years
6. A list of collateral that will be used to secure the loan
7. A personal guarantee from all owners of 20% or more of the business
8. A statement of how the loan will be used
9 . A list of all other loans the business has and their terms
10 . A list of all current and past owners of the business
11 . Articles of incorporation or a partnership agreement if the business is a corporation or partnership
12 . Resumes for all key management personnel
13 . Copies of leases, contracts, or other agreements that the business has entered into
14 . A copy of the business license or permit
15 . A copy of the small business certification if the business is owned by a disadvantaged group
16 . Any other information that the lender requires”
