5 Key Steps to Apply for a Small Business Loan - Appy Pie

5 Key Steps to Apply for a Small Business Loan

Abhinav Girdhar
By Abhinav Girdhar | Last Updated on June 12th, 2024 12:53 pm | 6-min read

Small businesses apply for a loan to get off the ground or to keep operating. They get financial support mostly in the form of a business loan. Small businesses can apply to get a commercial loan from banks, credit unions, and other financial institutions. Most of the time, banks provide loans to running businesses and not start-ups, so other financial institutions are the best options for new business owners.5 Key Steps to Apply for a Small Business Loan - Appy PieEvery small business at some point needs extra capital in addition to incoming cash flows. Sometimes, they need funds when an emergency pops up, at other times the business may need new equipment to replace broken or outdated machinery. It might be so that an entrepreneur wants to start the business and register a company to launch the product but has no access to money. In these circumstances, many small business owners decide to take a small business loan and fix their financial problems. Here are the different types of business loans offered by commercial banks, based on different terms, uses, and rates.
  • Long-term fixed-interest commercial loan
  • Construction loan
  • Refinance loan
  • Hard money loan
  • Interest-only payment loan
  • Short-term bridge loan
  • Blanket loan
Simply applying for the loan is not enough. To get it approved, you need to meet the loan eligibility criteria and follow the correct procedure. In this article, we will help you answer the critical question – how to apply for a small business loan and list out all the documents required for a business loan.

How to apply for a Small Business Loan?

To fulfill your small business loan requirements, follow the steps mentioned below and apply for the same.

  1. Determine why you need this loan
  2. Experienced business owners are clear about the reason and the amount of business loan they need. However, start-up business owners may struggle with the process of figuring out the loan amount they need and why they need it. Businesses need to prepare their financial statements to address the question of how much they need. It is important to take some time and determine the reasons you need the loan and the amount of the loan you may need.

  3. Determine which type of Loan do you need
  4. Being a small business owner, before you apply for a loan, try to take advice from some experienced business executives. Recall the reasons and find out which type of loan fulfills your small business loan requirements. Here are four reasons a small business may need to apply for small business loans
    • To start the business
    • To grow the business
    • To have a safety cushion
    • To manage day-to-day expenses
    Take a deep look at your financial bank statements and find out the reason why you really need the loan. If you’re planning to apply for a government loan for a new business, it’s practically impossible in your business’s first year. Any business owner who takes a loan would need cash flow for repayment of the loan, which is why startups are usually immediately disqualified from financing.5 Key Steps to Apply for a Small Business Loan - Appy Pie

  5. Determine Your Borrowing Options
  6. You can get a commercial loan from several places including online lenders, banks, non-profit microlenders, etc. These money lenders offer term loans, accounts receivable financing, and lines of credit. You need to shop for small business loans just as you would shop for any other product that you need to buy. Find the best available option and then apply for a business loan. Once you figure out which type of financing vehicle or money lender is right for you, compare the options based on the annual percentage rate, total borrowing cost, and terms. Of the loan options you qualify for, select the one with the lowest APR, so that you can handle the regular payments of the loan. Learn about the borrowing options in detail.

    1. Use banks when-
      • You have good credit
      • You don’t need cash fast
      • You can provide collateral
      Bank options include commercial mortgages, lines of credit, and term loans to buy properties or refinance. U.S. Small Business Administration provides bank loans for business using its 7 (a) loan program, disaster loans, and short-term microloans. Even the best banks for small business loans under the U.S. Small Business Administration offer an average loan size of $371,000 and range from about $5,000 to $5 million.

    2. Use Microlenders when-
    3. You do not qualify for a traditional loan because your company is a start-up or too small Microlenders lend short-term business loansof less than $35,000. The APR on the loans that they offer is typically higher than that of bank loans. You need to provide the lenders with your detailed business plan and financial statements when you apply for loans. The application may also require a description of what the loan will be used for.

    4. Use Online Lenders when-
      • You need funding quickly
      • You lack time in business
      • You lack collateral
      Online lenders offer lines of credit and small-business loans that range from $500 to $500,000. The average APR for these loans’ ranges from 7% to 108%, depending on the type and size of the loan, the borrower’s credit history, and the length of the repayment term. However, the approval rates for these lenders are higher. They offer funding as fast as within 24 hours which is way faster than the traditional banks.

  7. Evaluate your Credit Score and Credit History
  8. Moneylenders review your credit history and credit score before they approve the loan. In case you have a start-up business or if it is less than three years old, your personal and business credit history will be evaluated. To streamline this process and ensure accuracy in managing your financial records, consider using credit repair business software. This type of software can help in organizing and monitoring your credit repair efforts, making it easier to identify and address discrepancies in your credit report. Plan and get your personal credit history in order before you apply for a small business loan. You can also get your credit report from any credit reporting agency. Go through the whole history and if you find any errors, communicate that to the agency and get it fixed. You can get in touch with them by writing a letter or by sending an email. File a credit dispute report if the agency does not fix the error. It is almost impossible getting a business loan with a bad credit score, you do not even qualify for government small business loans with a bad credit score. This may be your most important step. To get a small business loan by the government or just about any lender.

  9. Gather your documents and Apply for a Loan
  10. After you have compared the options, it’s time to apply for the loans that you qualify for and those that fit your financing needs. Gather the required business loan documents, depending on the lender. Prepare an application with the combination of the following documents:
    • Personal and business income tax returns
    • Balance sheet and income statement
    • Personal and business bank statements
    • A photo of your driver’s license
    • Commercial leases
    • Business licenses
    • Articles of incorporation
    • A report that has the relevant management and business experience details
    • Financial estimates in case you have a limited operating history
    Gathering all documents required for a business loan can be a time-consuming task. However, that may not be an issue when you are applying for a long-term business loan to finance a major investment.


Before you submit your application for getting a small business loan, give it a second look and check if you have made compelling case for yourself. You can also prepare an application for the loan officer and the presentation of your business plan. Include an executive summary of why you need this loan in the package that you have prepared to hand to your loan officer. Many experienced loan officers go through the Executive Summary first and then decide whether they are interested in considering the application. Book an appointment with the loan officer and ask for enough time to do a short presentation based on your business plan. Keep it brief, concise, and organized.

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Abhinav Girdhar

Founder and CEO of Appy Pie