To obtain a small business loan in 2025, follow these key steps:
- Determine Your Loan Needs and Type
- Decide the loan amount and purpose (equipment, expansion, working capital).
- Consider different types of loans such as SBA 7(a) loans, SBA Express loans, microloans, online business lines of credit, or traditional bank loans.
- Check Your Credit Score and Financial Health
- Most lenders prefer a personal credit score of 580 or higher; traditional banks usually require 680+.
- SBA loans generally require credit scores around 640+, with microloans accepting lower scores.
- Online lenders may accept scores as low as 500.
- Have solid financial documents ready including tax returns, profit and loss statements, bank statements, and cash flow projections.
- Prepare Your Documentation
- Business information: business name, address, EIN.
- Financial statements: tax returns (2-3 years), monthly profit and loss, bank statements.
- Details of business owners: names, SSNs, addresses for those owning more than 20-25%.
- Collateral information if required.
- Business plan with realistic financial projections.
- Any licenses, permits, leases, and contracts relevant to the business.
- Apply for the Loan
- Choose where to apply: banks, SBA-approved lenders, online lenders, credit unions, or nonprofit organizations.
- Applications can be online, in person, or via phone depending on the lender.
- Use platforms like Mercury for quick access to business loans or apply directly with multiple lenders for comparison.
- Review Terms and Accept Loan
- Upon approval, review the loan agreement carefully, including interest rates, repayment terms, fees, and any personal guarantees.
- Ask questions or have an attorney review it if needed.
- Sign the agreement and receive funding, usually transferred directly to your business account.
Additional Tips:
- SBA 7(a) loans have lower interest rates (starting around 11.5%) and longer terms but require more documentation and longer approval times (60-90 days).
- SBA Express loans approve faster (within 36 hours) for loans up to $500,000 but at slightly higher rates.
- Microloans up to $50,000 are easier for startups with mentorship included.
- Online business lines of credit give quick access but tend to have higher rates (15-25%).
- Some loans do not require collateral but may need personal guarantees.
Being well-prepared with complete documentation and a strong business plan increases your chances of approval and getting favorable terms.
