How to Get a Business Loan: A Step-by-Step Guide

Start with what the money will produce

Write down the purpose, the amount and the return before you apply. A loan that raises profit by more than it costs is worth taking.

Lenders and funders ask what the money is for, and so should you. Common uses include inventory, equipment, hiring, marketing, covering a seasonal gap and refinancing.

Run payback math. Illustrative example: you borrow $50,000 for equipment that adds $6,000 of profit per month. If total repayment is $58,000 over 12 months, the extra $8,000 cost is easily covered by $72,000 of added profit. If the equipment adds only $2,000 a month, the loan is not worth it.

Use our small business loan ROI guide and decide how much you need with how to determine the right loan amount.

Match the need to the right product

Term loans suit one-time purchases, lines of credit suit recurring needs, equipment financing suits machinery, and SBA loans suit those who can wait for the lowest cost.

ROI Funder places several products:

• Working capital for general needs and cash flow gaps
• Revenue-based financing, where repayment rises and falls with sales
• Term loans with fixed payments, typically funded in 1 to 5 days
• Business line of credit, which you draw, repay and redraw, in 24 to 72 hours
• Equipment financing, typically 2 to 7 days
• SBA loans, slower but usually the lowest cost

Not sure which fits? See which funding fits your business.

Check whether you qualify

Funders look at time in business, monthly revenue, credit and bank activity. ROI Funder considers 6+ months, $20,000+ monthly revenue and 500+ FICO.

Different products have different bars. Banks and SBA loans generally want stronger credit and longer history. Alternative funders weigh revenue and cash flow more heavily.

Your own checklist:

• Months in business and legal entity in good standing
• Average monthly revenue over the last three to six months
• Personal credit score and any recent problems
• Existing debt payments and balances
• Industry, since some are restricted by many funders, such as long-haul trucking and residential remodeling

Read about business loan requirements and credit requirements to see how each factor is judged.

Gather your documents

Most files need an application, ID, business details and recent business bank statements. At ROI Funder, a complete file is the application plus 3 months of business bank statements.

Preparation speeds approval. Collect:

1. Legal business name, EIN and ownership details
2. Three months of business bank statements
3. Photo ID for owners
4. A voided check or bank details for funding
5. For larger or SBA requests: tax returns, profit and loss statements, a balance sheet and a debt schedule

Use our loan application checklist and getting loan-ready guide. Make sure statements are complete, with all pages, and that deposits match your reported revenue.

Apply and compare offers by true cost

Compare the total repayment, term, payment frequency and effective cost, not just the headline rate or factor. Convert payments to monthly equivalents.

Different products price differently. Some quote an interest rate, others a factor rate. A factor rate of 1.3 on $50,000 means $65,000 total repayment, so $15,000 of cost. Ask for the total dollars you will repay, the repayment period and the payment schedule.

Compare using the same measures:

• Total repayment minus amount funded
• Payment size and frequency, converted to a monthly equivalent
• Fees, prepayment terms and personal guarantees
• How the payment compares with your revenue

Our guides on the total cost of an offer and a worksheet to compare two offers make it simple.

Applying with ROI Funder takes a few minutes, uses a soft credit pull with no impact on your score, and carries no obligation to accept an offer.

Close, use the funds and repay

Read the agreement, confirm the numbers match your offer and use the funds for the plan you set. Track results against your payback projection.

Before signing, check the funded amount, total repayment, payment dates, any collateral or UCC filing, and what happens on default. Our guide on UCC filings explains a common one.

Once funded, put money to work quickly and track what it produces each month: added sales, saved costs or margin gained. If payments are daily or weekly, review the daily payment to monthly equivalent to keep your cash plan accurate.

Pay on time to protect your relationships with funders. Many offer better terms on renewals for good payment history.

If you are turned down

Ask why, fix what you can and consider a different product. Declines often point to timing, documents or the wrong product choice.

Common reasons include low revenue, short history, recent credit problems, too much existing debt or incomplete statements. Each has a response: wait and build history, improve deposits, pay down balances or choose a product with different criteria.

Do not apply everywhere at once. Too many hard inquiries and stacked obligations can hurt you. Read about loan stacking before taking more than one new obligation.

If a bank said no, a different product may still fit. Our second look funding page describes how a file can be matched differently. When you are ready, apply online.