Business loans can provide the capital to expand your business to pay employees and cover other expenses. Before you apply, be sure you are aware of how loans work and what kind of documentation you’ll need to provide to your lender. Be aware of the amount of time required to complete your application and any fees that might be charged.

Common uses of business loans

A business loan can be used to pay for unexpected expenses, such as an office chair that is damaged or the COVID-19 pandemic. You may also need to borrow money to cover an unavoidable expense such as upgrading or replacing technology, buying manufacturing machinery, or remodeling the interior of a store. Some lenders offer lines of credit that allow you to draw funds whenever you need it with a predetermined maximum and interest only charged on the amount you use.

The application process and eligibility requirements

You will be required to provide specific information about your company including the official name of your business along with its tax ID as well as any financial documents. These could include business plans, proposals and profits and loss statements along with the names and Social Security numbers of those who hold 20% to 25 percent or more of your business. Some lenders require that you’ve been in business for a minimum of one year, while others accept startups or do not have any time-in business requirements.

A mentor or adviser can guide you through the business loan process. Organizations like SCORE have an extensive network of business mentors that offers free or low-cost assistance to startups and small-sized businesses founders. You can locate a local chapter and talk to an advisor in person.

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