The small business loan requirements for any form of commercial funding will vary widely, depending on the lender you work with and the type of financing you’re applying for.
In this guide we’ll break down the most common business loan requirements, as well as review how to qualify and apply for a small business loan.
A Quick Guide to Business Loan Requirements
Here are some common business loan mistakes you’ll want to avoid—any of these mistakes can delay the process or even cause a lender to reject your application:
Although these may seem like simple errors, any one of them can be influential in the application process, so it’s worth taking the time to check and double-check your information and documents.
Above all, though, the main thing to avoid is making any kind of false statements (either knowingly or unknowingly) on your loan application. If you have any doubts about any of the details or financials included in your application, you’ll want to consult your accountant or lawyer for advice.
Although not all business loans will need a down payment, some loans, like SBA loans, commercial real estate loans, and equipment financing, may be more likely to include this requirement.
This being said, if the loan you’re applying for does require a down payment, the exact amount you’ll need to put down will vary based on the type of loan, amount of the loan, purpose of the loan, as well as your financial qualifications.
Generally, however, it’s safe to say that most down payments on business loans will fall between 10% and 20% of the loan amount.
Although not all business loans require a personal guarantee, many lenders will ask you to sign this type of document in order to secure your loan.
Generally, a lender will be more likely to ask for a personal guarantee if you aren’t offering up any other form of collateral on the loan. Therefore, if you’re looking for a business loan without a personal guarantee, you’ll want to explore options like inventory or equipment financing—both of which are self-collateralizing (the inventory or equipment itself serves to secure the loan).
Bank loans, term loans, and even lines of credit, on the other hand, are much more likely to require personal guarantees. In fact, SBA loans require a personal guarantee in almost every instance.