Exactly How the Small Business Loan Underwriting Process Works

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How long have you been in business?

Some lenders require you to pledge collateral—something of value, such as equipment or inventory—it can seize if you default on the loan. Some lenders may also require a personal guarantee, meaning you have to secure the loan with personal assets, such as your savings, home or other valuable possessions. If you don’t know the exact amount you need to borrow, a business line of credit could be a good option.

SBA loans are small business loans guaranteed by the Small Business Administration. These loans include SBA 7 loans, 504 loans, CAPlines, Microloans and others, each of which serve different purposes. SBA loans often come with lower interest rates and down payments than other options, but you’ll often need to be an established business to qualify. While banks and credit unions typically require high amounts, a few online and alternative lenders work with businesses with little-to-no money. Owners who’ve successfully conquered the business loan underwriting process will tell you that you can make some easy process adjustments in your day-to-day in advance of applying for a loan.

That said, startup owners may not qualify for the highest loan amounts and most competitive interest rates. Within each major category, we also considered several characteristics, including available loan amounts, repayment terms and applicable fees. We also looked at minimum credit score and time in business requirements and the geographic availability of the lender. While business loans from major banks might provide competitive rates for borrowers with strong credit, the application process can be cumbersome. If funding speed is a high priority, online lenders may offer faster funding. Meanwhile, secured business loans help startup businesses and business owners with bad credit get a loan with no down payment because they’re guaranteed by business assets.

Small Business Administration loans are enticing for business owners who want a low-cost government-backed loan. However, SBA loans are notorious for a long application process that can delay when you will receive the funding. It can take up to three months to get approved and receive the loan.

In the online funding marketplace especially, lots of loan experts specialize in business needs. Lending specialists, whether online or in person, can make all the difference in getting you the cash your business needs with an affordable business loan. Even the lender you use can change your interest rate; alternative lenders typically offer higher rates than traditional lenders .

What Happens If My Business Cannot Pay Back a Loan?

In October, he and his wife bought a 2,232-square-foot home in Goodyear, Arizona, for $385,000 with a 2.375% interest rate. Roam, a startup that connects homebuyers with sellers willing to sell their mortgages, Claudio purchased a 2,400-square-foot, $400,000 home with a 3.5% interest rate in October. Homeowners with certain loans can sell their low-interest-rate mortgages to qualified buyers.

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