Business loans can give you the capital to finance expansion as well as pay employees and cover other expenses. Before you apply, be sure to understand how these loans operate and what paperwork you’ll need to submit to your lender. Be aware of the length of time it can take to complete your application and any fees that might be charged.

Common uses for business loans

A business loan could help you cover unexpected expenses, like a damaged office chair, or the COVID-19 pandemic. In addition, you may require borrowing funds to cover an unexpected capital expenditure, like replacing or upgrading technology, purchasing equipment for manufacturing or renovating a retail store. Some lenders offer lines of credit that let you draw funding whenever you need it, with a set maximum and interest only charged on the amount that is used.

Application requirements and eligibility requirements

You’ll have to provide precise information regarding your business including the official name of your company as well as its tax ID number and any financial documents. This may include business plans, proposals, and profits and loss statements, as well as the names and Social Security numbers of those who own 20 percent to 25 percent or more of your company. Some lenders require that you have been in business for at least one year, while some allow startups and don’t have any time-in-business requirements.

A mentor or adviser can help you navigate the business loan process. Organizations like SCORE have a network of volunteers who act as business mentors who provide low- or no-cost advice to startups and small-sized businesses founders. Find an area chapter and meet an advisor in person.

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