Where to Apply for a Loan

• The first step in securing a small business loan is determining where you will apply for your loan. In the United States, you have two basic options: banks or government organizations. Bank loans are more difficult to obtain, in general, but for the right candidates, they provide the most flexibility. If your business is doing fairly well, is financially sound, and you can provide a solid plan for paying the money back, a bank may be the best option for you. Conversely, if you are starting a business, or running a company that is fewer than 2 years old, you may want to consider the various loans available from the government. The main source for government loans is the U.S. Small Business Administration, or SBA. SBA provides guidance, information and loans to business owners in every industry and of every size. They provide loans, typically at lower rates and with lower terms than those available from banks. You can find your local SBA branch on the organization's website. Schedule an appointment to learn about loan options and the application process for your particular circumstances.
  
  

The Application Process

• Whether you are applying for a business loan at a bank or through the SBA, you will need to complete a written loan application. Typically, this is a letter that includes basic information about your business, including financial statements, the amount you need to borrow and how the money will help your business. In addition, you should focus on how you will pay the money back, how long it will take you to pay it back and where the funds will come from. The SBA requires this proposal to be in a letter format, though banks may have their own application forms, so check with your lender. After you have submitted this information, the lender will review it and will contact you for additional information, or possibly to schedule a face-to-face interview.
  
  

Getting the Loan and Repayment

• If your loan is approved, you will be issued a check or bank draft for the amount of the loan. You are able to use this money only as stipulated by the loan agreement, whether it is to purchase property, lease equipment or simply to cover payroll as you work to increase cash flow. You will be required to pay back the loan as indicated in the agreement. This may involve making monthly installments or a lump-sum repayment. No matter how you repay it, the loan will likely include interest of some sort. This is a fee you pay the lender in exchange for the loan, and it is typically stated as a percentage of the money borrowed. It may be stated as an annual or even a monthly percentage, and there may be fees for early repayment of the loan. Be sure to carefully read any loan agreements, and consider having a lawyer examine them before you sign them.