The application process for online business loans varies by lender. However, there are some general steps that prospective borrowers must take to obtain business financing.
1. Evaluate your borrowing needs. Start the borrowing process by evaluating your business’ borrowing needs. First, consider why you need to borrow funds and determine how much you need to borrow. Use a business loan calculator to estimate monthly payments and review your budget to determine how much you can afford in loan payments each month.
2. Review your credit score and reports. Many business lenders check applicants’ personal credit scores and may require a personal guarantee on business loans. So, review your personal credit report and check your credit scores before choosing a lender. If you have an established business, it may have its own business credit score that can improve your approval odds.
3. Familiarize yourself with eligibility requirements. Once you’re familiar with your credit score, compare lenders based on their business loan requirements. Most business lenders impose minimum credit score requirements, require that borrowers be in business for a minimum amount of time and require a minimum annual revenue. However, others evaluate applicants based on nontraditional metrics and alternative credit data.
4. Compile necessary documentation. The documents necessary to apply for an online business loan depend on the lender. However, many lenders require tax returns for at least two years and financial records like bank statements, accounts receivable and outstanding invoices. It may also be necessary to provide a business plan to demonstrate the business’ ability to make on-time payments, though this is most common with less-established businesses.
5. Submit a loan application. After organizing your business’ application documents, complete an online application and submit the necessary supporting materials. Some online lenders further streamline this process by letting applicants connect their bank accounts and other financial tools.
6. Await verification and approval. Many online lenders offer same-day lending decisions, but the verification and approval process can take longer. For example, it may be necessary to provide additional documentation or speak with a lender representative prior to loan approval, which can extend the approval process to up to 30 days.