How to Get a Business Loan

Cindy Ockert

Honor Bank customer getting a business loanBusiness loans are a valuable asset for businesses of all sizes, whether they’re first opening their doors or preparing to enter stages of growth. There are many factors to consider when deciding if a business loan is the best next step, and – like any loan process – it can feel overwhelming at first. This guide walks you through the basics of evaluating business loans and preparing yourself to take this next step for your own business!

Types of Business Loans Available

  • Business line of credit – A line of credit allows you to access funds when you need them most, though a maximum will be set. This type of lending is perfect for business owners who don’t have significant purchases coming up but know they might need a safety net to help manage cash flow and unexpected expenses as the business grows.
  • SBA loans – Business loans backed by the Small Business Administration (SBA) offer low interest rates that are beneficial for small businesses. These loans do require more paperwork and great credit, but the team at Honor Bank is here to help you through every step of the process. Learn more about SBA loans.
  • Business Term Loans – A term loan offers a lump sum of money needed to invest in your business and is paid off over a set term or time period. Equipment loans are one popular type of term loan used to purchase important equipment like vehicles or other business assets. These loans may require a down payment but can be easier to receive than some other options, as the loan is secured by the asset being purchased.
  • Construction loans – Business construction loans finance the building or renovation of valuable space for your business, be it a retail storefront, office space or manufacturing facility.
  • Commercial real estate mortgages – These loans are used to purchase or refinance your commercial real estate; similar to a home mortgage. Real estate is a significant investment but can be a business’ greatest asset. Be sure to know your options and look for the best interest rate possible.
  • Municipal Loans – Honor Bank also offers municipal loans to municipalities looking to invest in new assets or infrastructure. If your municipality is interesting in our lending opportunities, get in touch with one of our commercial lenders.

Preparing to Apply for a Business Loan

Lenders will review your business finances with a fine-tooth comb, especially if you’re looking to take out a large loan. Know how you stand ahead of time by reviewing the following.

  • Credit score – Just as they do for a personal loan, lenders will take a look at your credit score – so make sure you know what they’ll find. Clean up any inaccuracies before a lender runs your credit.
  • Current loans and cash flow – A lender will want to ensure your current cash flow is sufficient to pay back the loan they’re offering. They’ll also review current loans or lines of credit and take the payback of those into account.
  • Business assets – Current assets such as cash and accounts receivable will assist lenders in ensuring that there are assets they could claim, should you default on the loan.
  • Time in business – Longevity of a business is important to lenders, as staying in business is a sign that you’re prepared to take on a loan.
  • Investors – The presence of professional investors in a business is a sign of success potential, so lenders will view investors favorably.
  • Financial statements – Be aware that lenders will closely review your financial statements as they assess your suitability for a business loan.

Knowing What you Need

A commercial lender can help you choose the best type of business loan, but you’ll need to be prepared beforehand so they can help you effectively. Consider exactly how much money your business needs, and be able to explain exactly how the funds will be used. Details like this illustrate to the lender that you’ve done your homework and have a skill for planning and forward thinking – two core traits of a good loan candidate.

Applying for the Loan

Once you know what type of loan is best for your needs, have gotten your business’s financial information in order, and have created a plan for the funds you’ll request, it’s time to apply for a loan! The Honor Bank commercial lending team can help you through the process, guiding you to do everything possible to increase the likelihood of receiving a loan.

If you know your business would benefit from a business loan but you’re still feeling unsure about getting started, get in touch with our team today – we’re happy to explain the details!

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