Finding the Best Small Business Loan for You

Small Business Loan – There comes a time in every business’s life when its owner needs additional funds, perhaps on a quick turnaround. This could come from a budget shortfall, an equipment breakdown that insurance did not cover, or some other reason.

Quick Fix Options

Some small expenses you can cover on a business credit card if you must, but others send you in search of loans for small business. If you think of arduous applications and a massive paperwork burden then you probably envisioned an old-school startup loan. Those provide tens of thousands of dollars or more for beginning a business.

For quick turnaround for a small- to medium-cost need, try online loans in Canada that let you apply for funds over the Internet. These typically respond more quickly than the bank down the street or your credit union. They also use shorter applications.

These loan institutions can do that because they rely more heavily on background checks than on the paperwork you would fill out at a local bank. For larger amounts, you will still probably need to provide your business plan. If you do not know those terms, bone up on business loan terms before applying for loans.

What This Means to You

Since your response largely rides on your business’ credit score, you need it to be good. If you just started your business, the bank will rely on your personal credit score. It also needs to fall within the good to very good range.

Personal credit scores use the FICO Scores which ranges from 300 to 900. You need about a 640 or 650 to qualify for a loan unless you can afford the sub-prime rates of a bad credit business loan. Businesses use a similar score scale. Banks also expect that you will have a Dun & Bradstreet number if you expect to work with the government at any level or to obtain grant money. D&B tracks financial information similar to how Experian and the other two major credit bureaus do. It sends businesses a Credit Signal report each month as long as they have registered to receive it. (It’s free to all who have a DUNS number, the number that D&B assigns your business when you register it.)

You will still need to provide supplementary information so you can finish your loan application. The online bank provides an email or an upload page for you to use. The paperwork varies, but expect to provide your latest financial reports and perhaps your business license. This varies by bank, so if you apply for a loan from more than one bank, the requirements will differ.

Important Loan Application Tip

Just a tip: Avoid applying for multiple loans at once. Each loan application results in a “hit” to your credit report that costs between three to five credit score points. You cannot escape that.

You can patiently wait for the first lender to say yes or no. That way, if they say yes, you only lost a few points. If they say no, you try again with a slightly lower score. If you applied to three different banks all at once, you would drop your score instantly nine to 15 points. That matters, especially if your score rides on a cusp. That means if your score is 640, the cut-off point for a good score, you drop it to fair with just one application, but with three, put yourself much lower. Patience is a virtue that literally can save you money in this aspect.