If you are a small business owner, you may need to take out a small business loan at some point. No matter what your current working capital situation is, this guide can help you become more familiar with the process involved with small business loans. Below, we’ll give you an overview of the steps involved in this process.
Overview: Small Business Loan Process
First of all, it’s important to note that the loan process depends on the lender. That being said, most lenders do require some specific steps, such as the completion of an application and a review of your credit report.
According to the U.S. Small Business Administration, the typical steps in the small business loan process are as follows:
Create a business plan
Most lenders will expect you to prepare a business plan explaining how your business works. They may also want to meet with you to discuss your needs.
Submit your application
You will be required to complete and submit the loan application to the lender you will be working with.
The lender will review the application and credit history
Once you have submitted your application packet, the lender will review the application, review your business and personal credit history, and decide to approve or deny your loan. If you do not meet their business or personal credit score requirements, your application will be denied.
The lender will prepare a loan offer
If your loan application is approved, the lender will prepare the documents to send you the offer.
The loan offer will be finalized
Once terms/conditions have been satisfied, the loan will be closed.
Funds disbursed to the borrower
The lender will disburse the funds to the borrower, based on the terms and conditions agreed upon.
The borrower pays the loan off
The borrower will make payments as agreed for the life of the loan. As long as there are no penalties for pre-payment, the loan can be paid off early. If the loan is not paid as agreed, the lender may take possession of the collateral.
The loan process is complete when the balance is paid off
Once the loan has been paid back in full, liens on any collateral will be released and it will be marked as paid.
These are the typical steps involved in the small business loan process if you are going through a bank or the SBA. Depending on the purpose of the loan, you may have to provide additional documents.
If you plan to put up collateral or provide a personal guarantee, there may be some additional steps.
Conclusion
The small business loan process can be quite overwhelming- but if you understand the application process, it becomes easier.
Remember, you must be prepared for various lenders to have different requirements and the process may change slightly depending on the type of business loan you are getting.
If you are ready to move forward with the small business loan process, contact Jasema Capital. We can walk you through the process from start to finish.