How to get a business loan: the eight steps and what lenders actually check

What getting a business loan actually involves

A business loan is not one thing. The sixteen options on this site are underwritten in different ways, funded on different timelines and priced on different logic, so "how do I get a business loan" has a different answer depending on what the money buys and how long the business has been trading. What does not change is the order of operations. Owners who get funded at a fair price almost always did the same eight things, in roughly the same order, before anyone pulled their credit.

The steps below are written for an owner who has never done this, or has done it once and was surprised by the outcome. They take a few hours of work. They also save weeks, because the most common reason a loan takes three months instead of three weeks is a file that arrived incomplete.

Step 1: Decide how much, and what it buys

Start with the purchase, not the amount. "I need $100,000" is a number; "I need $100,000 to buy a used excavator that lets me take the two contracts I keep turning down" is a loan application. Lenders fund purposes, and the purpose decides the product: a specific asset points to equipment financing, a seasonal gap points to a line of credit, buying a company points to an acquisition loan. Write down what the money buys, what that purchase produces in the next six to twelve months, and the smallest amount that gets it done. Borrowing the maximum you are offered rather than the minimum you need is the most expensive mistake on this list.

Step 2: Know your five numbers before any lender asks

Every underwriter looks at the same five things: how long you have been in business, your annual revenue, the owner's personal credit score, your monthly debt payments against your monthly cash flow, and what you own that could secure a loan. Pull them yourself first. Two years in business and two filed returns opens most products; under a year narrows the list to the startup paths. Revenue decides the size. Credit in the mid-600s or higher opens bank and SBA lending; below it, the asset-backed products remain. Cash flow that covers all debt payments with room to spare, commonly 1.25 times, is the test most files fail. Collateral lowers the rate and raises the limit. The resource article on the five numbers that decide your options walks through each one.

Step 3: Match the use of funds to the product

This is where most owners go wrong, usually by applying for the wrong product and reading the decline as a verdict on the business. The match is mostly mechanical:

• A specific machine, vehicle or fit-out: equipment financing, where the asset is the collateral
• Recurring cash-flow gaps, payroll timing, seasonal troughs: a business line of credit
• A one-off dated expense with a clear payback: a term loan or a working capital loan
• Slow-paying B2B invoices: invoice factoring, which releases the cash already owed to you
• Stock ahead of a season or a confirmed large order: inventory financing or purchase order financing
• Buying a business, a building you will occupy, or a franchise: an SBA 7(a), a 504, or an acquisition loan
• Under two years old: an SBA Microloan, equipment financing or a small credit-based line
• Anything that must fund this week: a bridge loan if there is a dated exit, and a merchant cash advance only as the last resort, with its real cost worked out first

The financing options page on this site compares all sixteen on amount, speed and cost, and each option's guide explains when it is the wrong choice.

Step 4: Check what you actually qualify for, before you apply

Each product has gates, and applying below them costs a hard inquiry and a decline on the file. SBA loans want two years, a credit score in the mid-600s or higher, cash flow coverage and, for a purchase, an injection of about 10 percent. Bank term loans want similar. Online term loans and lines reach down to six months in business and $100,000 of revenue, at a higher price. Equipment financing is the most forgiving on history because the asset carries the risk. Factoring underwrites your customers, not you. Check the requirements for the product you matched in step 3, and if you miss a gate, look one row down rather than applying anyway. A soft check that does not touch your credit is the right first move; a hard application is the last.

Step 5: Gather the documents once, properly

Most products want the same core package: the last two or three years of business tax returns, the owner's personal returns, a profit and loss statement and balance sheet dated within 90 days, six to twelve months of business bank statements, a debt schedule listing every loan, line and advance, and the purpose documents: a quote for the equipment, a purchase agreement for the business, a lease. SBA files add a personal financial statement and, for startups and acquisitions, a plan with projections. Build it before you apply. A complete package on day one is the single biggest driver of speed, and a debt schedule that does not match the bank statements is the single most common reason underwriting stalls.

Step 6: Compare offers on total cost, not on rate

The rate is the number lenders advertise, and it is rarely the number that decides what a loan costs. Compare the total cost of capital over the term you will actually use: interest plus origination, packaging, draw and maintenance fees, plus any prepayment penalty. Two term loans at the same rate can differ by thousands over three years once fees are in. For products priced with a factor rate rather than an interest rate (revenue-based financing, merchant cash advances), convert the factor to an annualized figure before comparing; a 1.30 factor over nine months behaves like roughly 72 percent a year, not 30 percent. Ask every lender for the same four things in writing: the total you will repay, the schedule, every fee, and whether the rate is fixed or variable.

Step 7: Apply, and understand the credit pull

A formal application usually involves a hard inquiry on the owner's personal credit, which can shave a few points for a few months, so apply to the one or two lenders you have already matched rather than to six. Expect underwriting to ask follow-up questions; the speed of your answers sets the speed of the file. Timelines run from a day or two for online lines and equipment, to one to three weeks for bank term loans, to 30 to 90 days for an SBA loan. Read the commitment letter before you sign: the rate, the fees, the collateral taken, the personal guarantee and the covenants, including any right to review or reduce the facility.

Step 8: If declined, fix the right thing first

A decline is information, not a verdict. Ask the lender for the reason; they are usually allowed to tell you and often will. The fixes map to the five numbers: thin history means wait for the second return or use an asset-backed product; low revenue means a smaller request or factoring; credit means pulling the reports and disputing what is wrong; coverage means less debt or a longer term; collateral means a secured version of the same product. The community thread on fixing a declined application covers the order to do them in. What not to do is apply to five more lenders the same week.

How much can I get

The honest rule of thumb is that the amount follows the product, not the ambition. Unsecured lines and online term loans tend to land between 10 and 20 percent of annual revenue. Equipment financing follows the asset's value, often most of it. SBA 7(a) loans go to $5 million but are sized against cash flow coverage. Factoring scales with the invoices you hold. Acquisition loans are sized against the target's earnings, not yours. Whatever the product, the figure is driven by coverage: lenders want the business's cash flow, after the new payment, to cover all debt with room to spare.

How long each product takes

• Merchant cash advance: same or next day, at the highest cost on this site
• Online business line of credit or short-term loan: one to three days
• Equipment financing: a few days to two weeks once the asset is chosen
• Invoice factoring: one to two weeks to set up, then days per invoice
• Bank term loan or line: two to four weeks
• SBA 7(a): 30 to 90 days; SBA Express is faster, a 504 is slower
• Business acquisition or commercial real estate: 60 to 120 days

Is business loan interest tax deductible

Interest on money borrowed for business purposes is generally deductible as a business expense in the United States; the principal is not, and personal use is not. Fees are usually deductible too, sometimes over the life of the loan. The rules depend on your entity type and how the funds were used, so confirm with your accountant. This guide is educational, not tax advice.

Common questions

How does a business loan work?

A lender advances a sum, or a credit limit, and you repay it over an agreed term with interest and fees, usually monthly. The lender decides based on the business's history, revenue, cash flow and collateral, and on the owner's credit and personal guarantee. The product decides the shape: a term loan is a lump sum on a fixed schedule, a line of credit is a limit you draw and repay, equipment financing is secured by the asset, and factoring is an advance against invoices you have already issued.

Where can I get a business loan?

Banks and credit unions for the lowest rates and the slowest process; SBA lenders for long terms on a government guarantee; online lenders for speed and lighter requirements at a higher price; equipment lenders and factoring companies for asset-backed products; and nonprofit microlenders for businesses under two years old. An independent advisor compares the options across all of them; a marketplace sells your application to whoever pays most for it.

How much of a business loan can I get?

It follows the product and the coverage test. Unsecured products often land at 10 to 20 percent of annual revenue; equipment financing follows the asset's value; SBA loans go to $5 million sized against cash flow; factoring scales with your receivables. Whatever the product, lenders want the business's cash flow to cover all debt payments, including the new one, with a margin.

Which business loan is best for a small business?

The one that matches what the money buys. For a specific asset, equipment financing is usually cheapest and easiest. For recurring gaps, a line of credit. For the lowest payment over the longest term on an established business, an SBA 7(a). For slow B2B invoices, factoring. "Best" is not a product; it is a fit between the purpose, the timeline and what the business qualifies for today.

Which bank gives business loans easily?

None, honestly. The lenders that approve quickly are the ones charging for it, and "easy" in a lender's advertising usually means a higher rate, a shorter term or a daily remittance. Banks approve slowly because they price low. The useful question is which product you qualify for today and what it costs, which is a comparison, not a shortcut.

Can I get a business loan with no revenue?

Very little on the debt side. SBA Microloans and credit-based cards and lines weigh the owner's credit and a plan, and equipment financing works because the asset carries the risk. Most other products want six to twelve months of deposits. The startup financing guide covers what is realistic before year two, and what to do in year one so year three is fundable.

“A loan is easy to get when you ask for the right one.”