The application process for online business loans varies by lender. However, potential borrowers must follow certain general steps to obtain commercial financing.
1. Assess your borrowing needs. Start the borrowing process by assessing your business’ borrowing needs. First, think about why you need to borrow funds and figure out how much you need to borrow. Use a business loan calculator to estimate monthly payments and review your budget to determine how much you can afford in loan repayment each month.
2. Review your credit score and reports. Many commercial lenders check applicants’ personal credit scores and may require a personal guarantee on commercial loans. So review your personal credit report and check your credit scores before choosing a lender. If you have an established business, it may have its own business credit rating which can improve your chances of approval.
3. Familiarize yourself with the eligibility criteria. Once you know your credit score, compare lenders based on their business loan needs. Most commercial lenders impose minimum credit score requirements, require borrowers to be in business for a minimum amount of time, and require a minimum annual income. However, others assess applicants based on non-traditional metrics and alternative credit data.
4. Compile the necessary documentation. The documents needed to apply for a business loan online depend on the lender. However, many lenders require tax returns for at least two years and financial documents such as bank statements, accounts receivable and unpaid bills. It may also be necessary to provide a business plan to demonstrate the company’s ability to make payments on time, although this is more common with less established businesses.
5. Submit a loan application. After organizing your company’s application documents, complete an online application and submit the necessary supporting documents. Some online lenders further streamline this process by allowing applicants to connect their bank accounts and other financial tools.
6. Wait for verification and approval. Many online lenders offer same-day loan decisions, but the verification and approval process can take longer. For example, it may be necessary to provide additional documentation or speak to a lender representative prior to loan approval, which can extend the approval process up to 30 days.