How Do I Qualify For A Small Business Loan?

How Do I Qualify for a Small Business Loan?

For many business owners, the idea of whether they would qualify for a small business loan might bring about uncertainty and stress. This can lead to analysis paralysis. To mitigate much of this, it’s best to get a good understanding of the process. So, how does one qualify for a business loan? Fortunately, it’s not as difficult as you might think.

3 Identification Steps to understand How Do I Qualify for a Small Business Loan


Who Qualifies for a Small Business Loan?

Let’s start with who qualifies. Any person or entity who holds ownership in a small business can qualify for a business loan. This does not mean the small business entity needs to be incorporated. A sole proprietor, as well as any type of partnership, can qualify for a small business loan. In other words, the entity does not have to be incorporated. An important aspect of determining your eligibility for a small business loan is whether you have a business bank account. If revenue is deposited into a business bank account, you will likely fit the definition of a small business owner.

Other variables need to be considered too. Some programs require a majority of ownership on the application. Other programs require a 75-100 percent ownership interest. A few funding programs do not require a significant ownership interest. Also, there is no single definition or set of parameters that establish an entity as a small business. In general terms, a small business will be any business entity that generates less than $40 million in annual revenue; however, the revenue figure varies from source to source. The U.S. Small Business Administration (SBA) has some general requirements as to what constitutes a small business:

  • Be a for-profit business of any legal structure
  • Be independently owned and operated
  • Not be nationally dominant in its field
  • Be physically located and operate in the U.S. or its territories

The SBA continues, “Businesses outside the U.S. may still be counted as small if they have an operation in the U.S. that makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor.”


What Types of Loans Qualify as Small Business Loans?

You have gotten to the point where you established your company will qualify as a small business under the definition. What loan products are available and how do I qualify for one? A great example is an SBA loan (“SBA” being an acronym for the administration to which we previously referred). This is a longer process than general funding and qualification standards are on the higher end. There are also lines of credit, merchant cash advances, and several other small business funding products. All these products are very useful, but some may be better for certain companies or industries or situations. Knowing your purpose for acquiring funds and return (time and margin) will help determine which product is best.


How Do I Go About Qualifying for a Small Business Loan?

Now that we’ve covered who qualifies for small business loans and what products are out there let’s answer the main question: How do I qualify for a small business loan?

We always recommend gathering all your pertinent information first. We recommend making sure you have your Tax ID Number available, as well as an idea or documentation of your gross annual revenue. You should also get six months of business bank statements together. You may also need your business’s most recent federal tax return, most current balance sheet, and your Profit & Loss Statement (year-end for the prior year and year-to-date for the current year). It’s always better to have a few too many documents than not enough. It will reflect well on you your business. 

Now, let’s discuss the process of how you qualify for a small business loan. You’ll start working with a qualified business funding specialist who will instruct and help you through the process. You will be required to fill out a short business funding application and present relevant financial documents. An answer is usually provided within 48 hours and sometimes within as little as 2 hours. This will tell you under what set of terms for which your business qualifies.


The Bottom Line

Qualifying for a small business loan can seem somewhat confusing and intimidating, but with the right knowledge, information and planning, it’s a reasonably simple process. If you’ve established that you’re the owner of a small business, identified which type of small business loan you need, and followed the preparation for application, you’ll likely get a solid offer from your chosen lender.

You can find a variety of small business lending options with Crestmont Capital. Our specialists can help you along the way with your application, and we approve 95 percent of our loan applicants! To learn more, click here to see our small business lending options. You can also contact us if you have any questions.