The basic path: where to start and what lenders want to see

Getting a small business loan starts with deciding what type of loan fits your situation, then finding a lender willing to fund it. Banks, credit unions, and online lenders all offer small business loans, but they look at different things and move at different speeds. Most lenders want to see a business plan, proof that your business exists (tax returns or bank statements), and personal credit information — even if you're applying for a business loan, your personal credit score usually matters.

The SBA (Small Business Administration) doesn't lend money directly. Instead, it guarantees loans made by banks and other lenders, which means the SBA promises to cover part of the loss if you default. This may provide makes lenders more willing to fund smaller or newer businesses. An SBA-backed loan typically requires more paperwork than a conventional bank loan, but the terms are often better — lower down payments, longer repayment periods, and sometimes lower interest rates.

The fastest route depends on what you need the money for and how established your business is. If you have two years of tax returns and a solid credit score, a conventional bank loan might close in four to eight weeks. If you're newer or your credit is weaker, an SBA loan takes longer — usually eight to twelve weeks — but you're more likely to get approved.

Key Takeaways

  • Most small business loans require a business plan, personal tax returns or business tax returns, and a personal credit check, even though the loan is for your business.
  • SBA-backed loans are may provide by the federal government, which means lenders take on less risk and can approve businesses that banks would normally turn down.
  • Banks typically close loans faster than SBA lenders, but SBA loans often have better terms like lower down payments and longer repayment periods.
  • You need to choose a lender before you apply — the SBA doesn't process applications directly, and different lenders have different speed and approval rates.
  • Prepare your documents before you approach any lender: business plan, personal and business tax returns, bank statements, and a personal credit report.

What documents you'll need before you apply

Lenders want proof that your business is real and that you can repay the loan. For a newer business (less than two years old), bring a business plan, your personal tax returns for the past two years, business bank statements, and a personal credit report. If your business has been operating for two years or longer, you'll also need business tax returns — usually the last two years.

You'll also need to show what the money is for. If you're buying equipment, bring quotes or invoices. If you're buying a building or inventory, bring documentation of the purchase. Lenders want to know the loan is going toward something that will help the business grow or operate, not toward personal expenses.

For an SBA loan specifically, you'll fill out the SBA Form 1919 (Statement of Personal History) and Form 912 (Statement Regarding Felony Conviction), even if you have no criminal history — these are standard forms the SBA requires. Your lender will guide you through which forms apply to your situation.

The difference between bank loans, credit union loans, and online lenders

Traditional banks offer the lowest interest rates if you may have access to, but they're the hardest to get approved by. They typically want at least two years of business tax returns, a personal credit score of 680 or higher, and a detailed business plan. The process is slower — four to eight weeks — but the terms are usually the best.

Credit unions often have lower rates than online lenders and more flexible approval standards than banks. Many credit unions have programs specifically for small businesses and may approve loans based on shorter business history. The downside is that you have to be a member, and not all credit unions offer business loans.

Online lenders approve faster — sometimes in days — and have looser credit requirements. The tradeoff is higher interest rates, smaller loan amounts (often capped at $100,000 to $350,000), and shorter repayment terms. Online lenders are useful if you need money quickly or your credit is below 650, but they cost more over time.

How SBA loans work and why they take longer

An SBA loan is a loan from a bank that the SBA guarantees. The bank still makes the decision to lend, but the SBA's may provide means the bank is protected if you can't repay. This protection lets banks lend to businesses they might otherwise turn down — newer businesses, businesses with lower revenue, or owners with weaker credit.

The most common SBA loan is the 7(a) loan program, which can be used for almost any business purpose: buying equipment, inventory, real estate, or working capital. Loan amounts range from $30,000 to $5 million, though most are between $100,000 and $350,000. The SBA guarantees up to 90 percent of the loan, so the bank's risk is smaller.

SBA loans take longer because the paperwork is heavier. Your lender has to submit your application to the SBA for review, and the SBA has to verify that you meet their requirements. The whole process typically takes eight to twelve weeks. If you're in a hurry, ask your lender upfront how long their SBA loans usually take — some lenders are faster than others.

What happens after you're approved and before you get the money

Approval is not the same as funding. Once a lender approves your loan, they'll send you a loan agreement to sign. Read it carefully — it spells out the interest rate, the monthly payment, the repayment period, and any conditions the lender has attached (like requiring you to maintain a certain amount of cash in the bank, or not taking on other debt without permission).

Before the lender releases the money, they'll order a title search if the loan is for real estate, verify your insurance if the loan is for equipment or property, and sometimes conduct a final check on your credit and business. This verification phase usually takes one to two weeks.

Once everything clears, the lender will disburse the funds. For some loans, the money goes directly to you. For others — especially loans for equipment or real estate — the lender may pay the seller directly to make sure the money goes toward what you said it would.

Common reasons lenders say no, and what to do if you're turned down

The most common reason for rejection is weak personal credit. If your credit score is below 650, most banks will turn you down. Online lenders and some credit unions will still work with you, but at higher rates. If credit is your issue, you can reapply after paying down debt or fixing errors on your credit report.

The second common reason is insufficient business history. If your business is less than six months old, most lenders won't touch you. If it's between six months and two years, you have options — online lenders, credit unions, or SBA lenders — but not traditional banks. The solution is to wait or to look for a lender that specializes in newer businesses.

A third reason is that the loan amount is too small or too large for what the lender offers. Some lenders have minimums (often $25,000 to $50,000) and maximums. If your request doesn't fit, shop around — different lenders have different ranges.

If you're turned down, ask the lender why in writing. They're required to tell you the specific reason. Then decide whether to fix the problem (pay down debt, wait longer, find a co-signer) or try a different type of lender.

Alternatives if a traditional loan isn't an option

If you can't get a conventional loan or SBA loan, other funding sources exist. A microloan is a smaller SBA loan (up to $50,000) designed for newer or very small businesses. Microloans come through nonprofit lenders, not banks, and the approval process is faster and more flexible, though interest rates are higher.

A line of credit is different from a term loan — you borrow only what you need, when you need it, and pay interest only on the amount you've drawn. Lines of credit are easier to get than term loans if your credit is weak, but the interest rates are higher.

Equipment financing lets you borrow money specifically to buy equipment, with the equipment itself as collateral. This is easier to get than a general business loan because the lender can repossess the equipment if you default. Vendor financing — borrowing directly from the equipment seller — is another option and sometimes requires no credit check.

A personal loan from a bank or online lender is technically not a business loan, but some business owners use personal loans to fund their business. The interest rates are usually higher, and you're personally liable for the debt, but approval is faster and credit requirements are sometimes lower.

Frequently Asked Questions

Do I need a business license to get a small business loan?

Most lenders want proof that your business is registered and operating legally, but the specific requirement varies. Some want a business license, others want an EIN (Employer Identification Number) from the IRS, and some accept just a business bank account. Ask your lender what counts as proof before you apply.

Can I get a small business loan if I have bad credit?

Yes, but your options are limited and more expensive. Online lenders and microloans work with credit scores as low as 550 to 600, though interest rates will be higher. Credit unions and SBA lenders are also more flexible than banks. If your credit is very weak, consider waiting a few months to pay down debt or fix errors on your credit report.

How much can I borrow?

It depends on the lender and the loan type. SBA 7(a) loans go up to $5 million, but most are smaller. Online lenders typically cap at $100,000 to $350,000. Microloans max out at $50,000. Banks set their own limits based on your business revenue and creditworthiness. Ask multiple lenders what they can offer for your situation.

What's the difference between a secured and unsecured loan?

A secured loan requires collateral — something the lender can take if you don't repay. Equipment loans are secured by the equipment; real estate loans are secured by the property. Unsecured loans don't require collateral but have higher interest rates and stricter credit requirements. Most small business loans are secured.

How long does it take to get the money after I'm approved?

Bank loans usually disburse within one to two weeks after approval. SBA loans take longer — sometimes three to four weeks after SBA approval — because of additional verification steps. Online lenders can disburse in days. Ask your lender for a timeline when you apply.