Business loans can give you the funds you require to purchase equipment or inventory for business expansion, finance business expansion or pay employees, and also cover other costs. Before applying, make sure you are aware of how loans work and what kind of documentation you’ll have to submit to your lender. Also, be aware of how long the application process can take and any charges you might incur.

Common uses of business loans

A business loan could allow you to pay for unexpected expenses such as an injury to your chair at work or the COVID-19 pandemic. Alternatively, you might require borrowing funds to cover an unavoidable capital expenditure, for example, upgrading or replacing technology, purchasing equipment for manufacturing or renovating a store. Some lenders offer lines of credit that allow you to draw money as needed with a maximum limit and click for more interest only charged on the amount used.

The application process and eligibility requirements

To be eligible for a business loan, you’ll typically need to provide detailed information about your company, which includes the name of your company along with the tax ID number and financial documents. This could include business plans including proposals, profits and loss statements, and the names and Social Security Numbers of those who hold 20-25 percent or more of your business. Some lenders require you to have been in business for at minimum for a year. Others will accept startups or do not have any time limits.

It is beneficial to have a guide or mentor to help you navigate the business loan process. SCORE, for example, has an extensive network of business mentors who provide no-cost or low-cost guidance for entrepreneurs who are starting their own companies. Find a local chapter and meet an advisor in person.