The Ultimate Guide to Applying for a Business Loan

A business loan can help a small business establish itself or help a company expand its line of products, open an additional location, move to a larger site, hire new team members or purchase expensive equipment.

Here’s all you need to know about applying for a business loan:

Make sure your credit is in order

Before applying for a business loan, check your personal and business credit health.

A personal credit score ranges from 300-850. A score ranging from 580-669 is considered fair, 670-739 is good, 740-799 is very good, and 800-850 is considered exceptional. You can check your credit report once a year at no cost from Review your score for any inaccuracies or fraudulent charges and dispute these immediately through any credit bureau websites: ExperianEquifax or TransUnion.

Business credit scores are measured differently.

Experian uses Intelliscore Plus as its credit scoring model, with scores between 1 and 100.

Equifax assigns each business three different scores: a payment index score, which assesses the company’s payment history, ranges between 0 and 100; a credit-risk score evaluating how likely the business will not meet on-time payments, ranges between 100 and 992; and a business failure score measuring how likely a business will fail, ranges between 1,000 and 1,880.

The Dun & Bradstreet Corporation also measures business credit scores. The D&B score range is 0 to 100, and the key factor it considers is the timeliness of payments made to previous creditors. To receive a D&B score, a business must file for a free DUNS number, and a minimum of four lenders or suppliers must provide information about the company’s borrowing habits.

Finally, the FICO Small Business Scoring Service (SBSS) score ranges from 0 to 300. It considers variables such as the business owner’s personal credit score, the company’s payment history, the number of employees and the age of the business.

If your personal and/or business credit scores are low, improve your credit before applying for a loan. You can do this with on-time monthly payments and low credit utilization.

Update your business plan

Be sure to have a thoroughly crafted business plan to show a prospective lender before applying for a loan. The plan should include details about how the company intends to use the funds from the loan, the anticipated increase in revenue and plans for repaying the loan.

Consider arranging supplemental collateral

Lenders generally prefer to reduce the risk of a borrower defaulting on a loan by securing collateral. This usually includes the company’s accounts receivable, equipment or other valuable assets. The lender can seize the collateral if the borrower cannot repay the loan.

When applying for a business loan, you can offer additional collateral to the lender, such as personal assets, like real estate or other valuables. This will make you more likely to qualify for the loan and may bring down the interest rate on your loan as well.

Organize your personal and business documents

You’ll need the following documents and identifying paperwork to apply for a business loan:

  • Photo ID
  • Accurate monthly financial statements from the past two years
  • Business license
  • Any commercial leases
  • Business insurance plans
  • Payroll records
  • Incorporation documents
  • Current financial obligations
  • 3 months of bank statements
  • Personal and business tax returns
  • Collateral, if required

Research potential lenders

It’s best to research potential lenders before applying for a loan. Learn about each lender’s eligibility criteria to anticipate whether you will qualify for a loan. Look up average loan interest rates for each lender, as well.

At KeyPoint, we can create a business loan program that fits whether you want to expand operations, buy or refinance commercial property or pay large expenses. Learn more today!  

Submit your application

Once all the paperwork is in order and you’ve chosen a lender, you can apply for a loan. Depending on your lender, you may be able to begin and/or complete the application process online. Be patient; loans can take anywhere from one day to several months from the application to funding. You’ll soon have the necessary funds to take your business to the next level.