The Checklist for Applying Online for Small Business Loans

January 4, 2023

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Properly applying online for small business loans can help ensure you receive the right loan at an appropriate cost. Online applications can also be very different from traditional loan applications at brick and mortar institutions. In order to simplify the process of seeking out online business lenders, small business owners should make sure to follow the steps outlined here.

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1. Consider the Pros and Cons of online lending

Before you take any steps, you should decide if online lending is the right path for you and your company. Business financing on the internet is still a relatively new industry and you should be sure that getting a new business loan online is the right move compared to other financing options.


  1. Convenience: Online lending is convenient because you can apply for a loan from the comfort of your own home or office. You don’t need to visit a bank or other financial institution in person.

  2. Speed: Online lenders often have a streamlined application process that allows you to get a decision on your loan quickly. This can be especially helpful if you need a loan to meet a pressing business need.

  3. Flexibility: Online lenders may offer a wider range of loan products and terms than traditional lenders. This can make it easier to find a loan that meets your specific needs.


  1. Higher interest rates: Online lenders may charge higher interest rates than traditional lenders, which can make the loan more expensive in the long run.

  2. Lack of personal interaction: With online lending, you may not have the opportunity to meet with a loan officer in person. This can make it harder to get your questions answered and may make it more difficult to build a relationship with the lender.

  3. Fraud risk: There is a risk of fraud with online lending, so it’s important to do your due diligence and research the lender before applying for a loan. Make sure the lender is legitimate and reputable.

  4. Limited options: While online lenders may offer a wide range of loan products, they may not have the same level of flexibility as traditional lenders. This can make it more difficult to find a loan that meets your specific needs.

2. Build your credit

The terms of your business loan depend on your credit. Lenders, even online lenders, don’t want to lend money to borrowers who are unlikely to repay loans. Your credit score is how you can prove to these lenders that you’re the right business to back. Bad credit indicates to lenders that you’ve got a history of debt problems.

If possible, try to build up your credit before you begin the application process. A high credit score means lower monthly payments, which helps keep cash flow moving. Building credit means:

  • Pay your bills on time. Payment history is one of the most important factors in determining your business credit score. Make sure to pay all of your bills, including credit card bills and loans, on time to avoid late fees and negative marks on your credit report.

  • Keep your credit utilization low. Credit utilization is the amount of credit you’re using compared to your credit limit. It’s generally recommended to keep your credit utilization below 30%. To improve your credit utilization, consider paying off balances on your credit cards or increasing your credit limits.

  • Diversify your credit mix. Having a mix of different types of credit, such as loans and credit cards, can help improve your credit score. This is because lenders want to see that you can handle different types of credit responsibly.

  • Monitor your credit report. It’s important to regularly review your credit report to ensure that all the information on it is accurate. If you find any errors, dispute them with the credit bureau to have them corrected. This can help improve your credit score.

3. Determine the type of financing you need

Once you’re sure that your company should seek a loan online, you’ll need to decide which funding option will work best. There are different types of small business loans available, such as term loans, lines of credit, and SBA loans. Determine which type of loan is best suited for your business needs.

Term Loans

Term loans are traditional loans that have a fixed repayment schedule and a fixed interest rate. They are typically used for large expenses, such as purchasing equipment or expanding a business. Term loans are best for businesses that have a long track record of financial stability and can afford to make regular loan payments.

Business Lines of Credit

n most business loans, the loan amount hits your bank account upfront, and payments are made thereafter. In a business line of credit, that’s reversed: a line of credit is a flexible loan option that allows businesses to borrow up to a certain amount of money and pay it back as needed.

Interest is only charged on the amount of money that is actually borrowed. Lines of credit are best for businesses that need access to a reliable source of short-term financing.

Business Credit Cards

Business credit cards are a type of credit card designed for businesses and business owners. They offer features and benefits tailored toward business expenses and often have higher credit limits and rewards programs. Business credit cards can be used to make purchases and pay for business expenses, and can also help establish a business credit history.

SBA Loans

The U.S. Small Business Administration backs loans offered through participating third-party lenders. These SBA loans have long repayment terms and low interest rates compared to other types of loans, making them a good option for businesses that have difficulty qualifying for traditional loans. There are three main types of SBA Loans:

SBA 7(a) Loans
The 7(a) Loan Program is the SBA's primary loan program and provides funding for businesses that are unable to obtain financing from traditional sources. 7(a) loans can be used for a variety of purposes, including working capital, equipment purchases, and real estate acquisition.
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SBA 504 Loans
The 504 Loan Program provides long-term, fixed-rate financing for the purchase of fixed assets, such as real estate and equipment. 504 loans are typically used by small businesses that are expanding or modernizing.
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SBA Microloans
The Microloan Program provides small, short-term loans to small businesses and nonprofit organizations. Microloans can be used for a variety of purposes, including working capital, inventory, and supplies.
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Equipment Financing

Equipment financing is a type of loan that is specifically designed to help businesses purchase new equipment. The equipment itself serves as collateral for the loan, and the business makes regular payments until the loan is paid off. Equipment loans are best for businesses that need to purchase new equipment but don’t have the cash on hand to do so. Typically, you’ll also need to provide a 20% down payment on whatever the equipment may be.

Alternative Financing:

The following forms of financing are not loans, but are excellent options for financing in certain situations.

Invoice Financing

Invoice financing is a type of financing that allows businesses to borrow money based on their outstanding invoices. This type of funding is best for businesses that have a lot of unpaid invoices and need a quick injection of cash.

Merchant Cash Advances (MCAs)

Merchant cash advances (MCAs) are a form of financing where a lender provides a lump sum payment to a business in exchange for a percentage of the business’s future sales. Unlike traditional loans, MCAs do not require collateral or fixed monthly payments, but instead are repaid through a portion of the business’s daily credit or debit card sales. This type of financing can be useful for businesses that have inconsistent cash flow or do not qualify for traditional loans due to poor credit or lack of collateral. However, MCAs often come with higher fees and interest rates than traditional loans, so careful consideration should be given before entering into such an agreement.


4. Gather financial documents

You will need to provide financial documents to the lender, such as income statements, balance sheets, and tax returns. Gather these documents ahead of time to make the loan application process smoother.

  1. Business tax returns: Lenders will want to see your business’s tax returns to get a sense of your financial performance.

  2. Personal tax returns: Some lenders may require you to provide personal tax returns as part of the loan application process.

  3. Business financial statements: Financial statements, such as income statements and balance sheets, provide a snapshot of your business’s financial health. Lenders will want to see these documents to assess your business’s ability to repay the loan.

  4. Business plan: A business plan is a document that outlines your business goals, target market, and financial projections. Some lenders may require a business plan as part of the loan application process.

  5. Collateral: Some lenders may require you to provide collateral, such as assets or property, as security for the loan.

  6. Credit history: Lenders will want to review your credit history to assess your creditworthiness.

  7. Resumes: You may need to provide resumes for yourself and any key employees to give the lender a sense of your experience and expertise.

  8. Proof of ownership: Some lenders may require proof of ownership, such as articles of incorporation or a business license.

  9. Lease agreement: If you rent your business space, you may need to provide a copy of your lease agreement.

  10. Bank statements: Lenders may request copies of your business’s bank statements to get a sense of your financial activity.

5. Find a lender

Look for a lender that offers the type of loan you need and has terms that are suitable for your business.

First, many traditional lenders and big-name financial institutions allow you to apply for business loans online. But there are also numerous online alternative lenders specializing in the process of getting your business the cash you need over the internet.

There are also lending platforms. A lending platform allows you to directly compare funding offers from a number of lenders at the same time in order to decide which is best.

6. Complete the small business loan application

Fill out the loan application provided by the lender and provide any additional documents or information that the lender may require. There are a few things to keep in mind while filling out your loan application.

  • Be honest: It’s important to be honest and accurate when filling out a loan application. Lenders will verify the information you provide, and any discrepancies could jeopardize your chances of getting approved for a loan.

  • Provide complete information: Make sure to provide all the information that the lender is requesting. If you leave out any important details, it could delay the loan process or result in your application being rejected.

  • Understand the loan purpose: Be clear about how you plan to use the loan funds. This will help the lender understand your business needs and determine whether the loan is a good fit for your business.

7. Wait for a decision

After you have submitted the loan application, the lender will review it and make a decision. This process can take several weeks, so be patient.

Waiting to be approved is difficult. If the loan amount is going to be a huge boon to your company, you might feel anxiety about your financial situation. Or if the funding is intended to help pay for something timely, that time crunch can make the process feel interminable.

Stay patient, and stay calm. You’ll be able to pick your momentum back up once the decision has been made.

8. Review the loan terms

It is important to review the terms of your business loan carefully because the terms of the loan will have a significant impact on your business. The loan terms, such as the interest rate, fees, and repayment schedule, will determine how much the loan will cost you in the long run and how easy or difficult it will be to repay the loan. If the loan terms are not favorable, it could make it more challenging for your business to succeed.

For example, if the interest rate is too high, it could make the loan too expensive for your business to afford. Similarly, if the repayment schedule is too short, it could put too much pressure on your business to pay back the loan quickly, which could be difficult if you are experiencing financial challenges.

By reviewing the loan terms carefully, you can ensure that the loan is a good fit for your business and that you are comfortable with the terms. This will give you the best chance of being able to repay the loan and keep your business on track for success.

9. Accept the loan

If you agree to the loan terms, sign the loan agreement and accept the loan. Make sure to keep track of your loan payments and make them on time to avoid any negative impact on your credit score.

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