There are so many different business funding products and places to start, but when an opportunity or need arises, you may not have time to navigate through all the red tape to get your hands on much needed funding.
Small businesses often face hurdles while applying for business funding. It could be due to operating in a high-risk industry, limited personal or business credit, insufficient collateral, inconsistent cash flow, incomplete or poorly prepared applications, limited time in business or maybe the bank or lender you are going to is no longer approving clients for funding.
Different banks/lenders/funders have different programs. And each program has different requirements to qualify not to mention different funding limits, repayment terms and fees.
If you’re looking for a long-term repayment option, then maybe a traditional bank loan or SBA loan could be the best fit as they provide advantageous terms for small businesses. You need to provide typically 2-3 years of financials and depending on the funding amount you are requesting can get funding anywhere from 15-90days.
Or if you’re looking for same day funding options, there are online lenders you can connect with that allow you to gain access to same day funding with providing just a few months of bank statements and repayment terms up to 36 months for those who qualify.
Understanding the Loan Process
Understanding the loan process is crucial for making informed financial decisions. Working with a company like the Working Capital Marketplace can help you ensure you are applying for a program that is in line with your needs as well as help you through the loan application process to ensure you can achieve the bets funding options for you in the timeline needed. This guide breaks down each step, helping you navigate through the application process:
Application Process
Securing a business loan requires following several essential steps during the application process. A well-formulated business plan with your use of funds is a foremost and crucial step as it details the goals, financial forecasts, and repayment capabilities of the business, proving to creditors the feasibility of the project. A strong credit score and established business credit background might be important as they demonstrate the borrower’s capacity to handle debt responsibly.
Additionally, there are several ways to apply for a loan. Businesses have the option to seek loans either digitally or by physically going to a bank. Online applications provide convenience and quickness, while traditional methods that are by going to the bank physically may offer more personalized help.
Documentation requirements for Bank or SBA type funding typically includes:
- 3-12 months of Business Bank Statements depending on industry and amount requested.
- If you are looking for funding greater than $250K+ you may need to provide P&L and Balance Sheets.
- Business Tax returns for the previous years is also a common request if looking for funding greater than $250K+
- Depending on funding amount and use of funds, some lenders also may require collateral, such as real estate, inventory, or equipment, to secure the funding for your business.
- Your credit scores play a significant role in the approval process, be it positive or negative.
Underwriting and Approval
The evaluation of your business’s financial situation and creditworthiness is a part of the underwriting process. Lenders carefully monitor and evaluate your business’s credit history, income, business performance, and collateral to evaluate risk and provide funding. With these lenders can be assured that the borrower will pay off the loan within the repayment time frame.
Lenders could also consider the industry trends and economic conditions. After the agreement, the interest rate and repayment terms are finalized upon which the loan is finalized. Comprehending this process assists companies in getting ready and increasing their chances of loan authorization.
Factors that Affect the Loan Processing Time
Type of Loan: Some loans, like SBA loans, could experience lengthier approval procedures because of governmental rules and extra documentation. If you’re looking for revenue-based funding options, you can fund as quickly as 1-3 business days.
Collateral: Some small businesses might have to face difficulty in acquiring funds through loans. However, with collateral, you don’t have to worry. This assures the lenders that if borrowers are unable to pay the debt they have collaterals to compensate.
Business Financial Health: To evaluate if the borrower can repay the debt within the repayment time frame is assessed by the financial health of your business.
Amount Requested: If you’re looking for funding up to $500K you can find options that will fund as quickly as 24hours. When you are requesting funding greater than $500K, there tends to be additional documents requested that could draw out the approval and funding process.
Approval Timeframes
The time it takes to approve a loan can differ greatly based on the loan type. Quick business loans aka express loans are created for rapid capital availability, generally have a processing time of same day to one week. These loans are designed for quick processing, often needing only a small amount of paperwork. Many times, the delay is when a business owner is requesting a large loan amount $500K+, but doesn’t have their documentation up to date such as – YTD Financials, P&L and Balance Sheet, Accounts Receivable Reports, Account Payable Reports, Work in Progress Reports, etc. A lender may request those kinds of reports based on dollar amount requested.
We have business line of credit options that can be approved same day as well for up to $275K.
To Get an SBA loans, that typically takes a longer time. There are sba express programs, that you can fund in as little as 14 days assuming you are approved and have all your documentation in order. SBA loans are federal government-backed loans, that usually take longer than others to process. The typical time that Small Business Administration takes is between weeks to months, as they have a detailed application and approval process. However, with the help of lenders and the working capital marketplace, this time frame can be reduced.
Overall, businesses that have been around for a longer period of time and have strong business and/or personal credit, and have their financial documents prepared and readily accessible can expect faster approval and funding times.
Businesses can better prepare for the loan application process by understanding these factors, ensuring they meet their chosen loan type’s requirements and timelines.
How Long Does It Take to Get a Business Loan?
Need an urgent loan? It is important to understand that there are various factors that affect the loan process timings. Let’s understand the factors that affect the factors:
Type of Loan
The duration of loan processing differs depending on various factors, such as the type of loan. SBA loans typically require more time to be processed because of the extensive documentation and approval criteria involved. On the other hand, rapid business loans are intended for easy and speedy fund access, typically with less paperwork and quicker approval durations. This makes them perfect for companies looking for quick funding with good terms.
Lender Considerations
The time it takes to process a loan can differ greatly depending on the lender. Banks and credit unions have extended processing times because of strict policies, comprehensive paperwork, and detailed credit checks. Online lenders as well as alternative lenders frequently provide quicker processing times by using efficient digital platforms and more adaptable criteria. Understanding these variances can assist borrowers in selecting the lender that aligns most with their urgent requirements.
Borrower Preparation
Business owners can accelerate the loan procedure by meticulously preparing ahead of time. Important actions involve sorting all required financial paperwork, including tax returns, profit and loss statements, and business plans. Making sure documentation is accurate and complete is vital, as it helps prevent delays caused by missing or wrong information. Responding promptly to any requests from lenders for more information can also help expedite the process. Effective preparation and attention to detail indicate dependability and have the potential to greatly reduce the time required for loan approval.
Summing Up!
To summarize, small businesses need business loans to grow, and in todays market, there are multiple options for funding based on your timeline, qualifications and needs. Business owners should always look to keep their financials up to date that way if a funding opportunity or need does arise they are putting themselves in the best position to get approved and funded.