A Step-by-Step Guide on How to Get a Loan in the US
Running a business is a capital-intensive process. You require funds to adequately cover your day-to-day expenses, fulfill inventory requirements, and expand operations. And this may necessitate you to apply for a business loan, at some point in time. Today, we will help you understand how to get a loan in the US. Right from evaluating your options to preparing your application, this guide will quickly help you get started.
How to Get a Loan in the US?
1. Determine the type of business loan you need
There are many different kinds of options in the US. Outlining your business objectives and why you need financing can help you select the right kind of loan. Here are some of the most common scenarios for taking one:
- Fund day-to-day business operations: If you need some money to fund your daily expenses, you can opt for a working capital loan.
- Purchase new equipment: Many lenders provide new equipment loans for the purchase of new machinery or office furniture.
- Fund a startup: Most lenders abstain from offering a startup loan to fund a new business idea. In that case, you can apply for a business credit card or a microloan as qualifying for that is easier.
2. Evaluate your eligibility for a business loan
The next step in the process of how to get a loan in the US involves assessing your eligibility. And for that, you need to review the following:
- Credit score: Make sure you have a high credit score as that will showcase your ability to repay the loan. Also, a higher credit score will help you receive a low-interest rate.
- Collateral or personal guarantee: Many lenders necessitate business owners to pledge some kind of collateral, such as property, equipment, etc. that they can seize if the loan is not repaid.
- Annual revenue: Your annual revenue is also a crucial deciding factor. Many lenders review your annual sales, tax returns, and other business finances to evaluate your business’s eligibility. Additionally, your time in the business also matters. Many traditional banks abstain from giving loans to businesses that have been in business for less than two years.
3. Compare Business Lending Options
There are many lending options that can help you secure a business loan. Three of the most common options include:
- Traditional banks: Traditional banks offer many different kinds of loans to business owners, such as term loans, microloans, lines of credit, merchant cash advances, etc. The best part about traditional banks is that they offer much lower rates of interest as compared to online lenders or microlenders. However, they have more strict eligibility requirements. For instance, a business owner with a credit score of 580 or lower will find it very difficult to qualify.
- Online lenders: Online lenders also offer a variety of loans, just like traditional banks. They also have less stringent eligibility criteria, making it easier for business owners to secure their choices. Additionally, online lenders offer a faster turnaround time when it comes to issuing funds. The only downside of online lenders is that they charge a higher interest rate.
- Microlenders: Microlenders are majorly for NPOs that can secure loans of up to $50,000. These lenders help business owners who do not qualify for traditional business loans.
4. Collect all Necessary Documents
Now that you know where and how to get a loan in the US, you need to gather all the required documents. In most cases, you need to submit the following documents:
- Business tax returns
- Articles of incorporation
- Business licenses
- Building lease
- Personal and business bank statements
- Profit and loss account statements
- Financial statements
You can talk to your lender to find out if they have any specific requirements.
5. Submit your application
The last step is to submit your business loan application. Once you have prepared your file, you need to submit it along with the below-mentioned details:
- Your business name
- Social security number card
- Purpose of loan
- Desired loan amount
- Business tax ID
- Annual revenue details
The aforementioned steps on how to get a loan in the US will help you get started with your application. Once you have applied, you will have to wait for the approval decision. In most cases, the approval takes 7 to 10 working days. If your loan gets approved, the lender will send you an agreement to sign before issuing the funds.
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You may need assistance with the following issues during the establishment of your business, the running of business operations, or the stages of closing your business.
- Create a Business Plan
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- Choose a Location
- Finance Your Business
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- Licensing and Certification Guide
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- Paying Taxes
- Contract with the State
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- Open Another Location
Expert lawyers and professional consultancy save you time and money at these stages. We are always ready to help you.
To start and run your business in the USA, you need a lot of documentation to be prepared. When you need business licenses and permits, we can help you. You cannot be an expert in every subject you need. An expert consulting firm you can trust will save you time and money.
Comprised of experienced business attorneys, marketing experts, and business advisors, Liberty Business has the answers to any questions or needs a blossoming business may have.