What You Need to Know Before You Start
A small business loan is money a bank, credit union, or the Small Business Administration lends to your business that you repay over time with interest. The path to getting one depends on what type of loan you're after — an SBA loan (backed by the federal government), a conventional bank loan, or a microloan — and each has different paperwork, timelines, and requirements.
Most lenders want to see three things: proof your business exists and is operating, proof you can repay the money, and collateral or a personal may provide backing the loan. The process typically takes four to eight weeks from process to funding, though SBA loans can take longer. You'll need to gather documents before you walk into a bank or submit an online form, and you should know your credit score and how much money you actually need.
Key Takeaways
- SBA loans, conventional bank loans, and microloans each have different requirements and timelines — SBA loans take longer but have lower down payments and interest rates.
- Lenders require your business tax returns (usually two years), a personal credit report, a business plan or summary, and proof of collateral or personal assets to may provide the loan.
- Your personal credit score and the age of your business matter — most lenders want a score of 620 or higher and a business that has been operating for at least two years.
- You can start by contacting banks where you have accounts, credit unions, or SBA-approved lenders, all of which can tell you what documents they need before you spend time gathering everything.
Gather Your Financial Documents First
Before you contact a lender, collect your business tax returns for the past two years. If your business is newer than two years old, bring what you have. You'll also need your personal tax returns for the past two years, a current business bank statement (usually from the last 30 days), and a list of any business debts you already owe — credit cards, equipment loans, other lines of credit.
Pull your personal credit report from one of the three major bureaus: Equifax, Experian, or TransUnion. You can get one free report per year at annualcreditreport.com. Know your credit score before you explore; most lenders want 620 or higher for conventional loans and 640 or higher for SBA loans, though some will work with lower scores.
Write down what collateral you can offer — real estate, equipment, inventory, or a vehicle. If you don't own collateral outright, note what you do own and what it's worth. Some lenders will take a lien on business assets; others want personal assets as backup. Have this list ready when you call.
Decide Which Type of Loan Fits Your Situation
An SBA loan is backed by the federal government, which means the lender takes less risk and can offer lower interest rates and longer repayment terms. You'll typically need to put down 10 to 20 percent of the loan amount yourself. The catch: the process is longer, the process takes six to eight weeks or more, and you need an SBA-approved lender. The most common type is the 7(a) loan, which goes up to $5 million.
A conventional bank loan comes directly from a bank or credit union with no government backing. These move faster — sometimes three to four weeks — but usually require a larger down payment (20 to 30 percent), a higher credit score, and two to three years of business tax returns. Interest rates are higher than SBA loans.
A microloan is a smaller loan, usually under $50,000, from a nonprofit lender or credit union. These are faster and have looser documentation requirements, making them good for newer businesses or those with lower credit scores. Interest rates vary widely.
Contact Lenders and Ask What They Need
Start with banks where you already have a business account — they have your history and may move faster. Call the small business lending department and ask what documents they need for the loan amount you're seeking. Write down the exact list so you don't waste time gathering things they won't look at.
If your bank says no or doesn't offer what you need, contact credit unions in your area. Credit unions often have more flexible lending rules than banks. You can also search for SBA-approved lenders on the SBA website at sba.gov; use their lender search tool to find banks and credit unions near you that make SBA loans.
For microloans, search "microloan lender near me" or visit the SBA's microloan program page to find nonprofit lenders in your state. These lenders often provide business coaching along with the loan.
Complete the process and Submit Your Documents
The lender will give you an process form — either on paper or online. Fill it out completely and honestly. You'll be asked about your business structure (sole proprietorship, LLC, corporation), how long you've been in business, what the loan is for, how much you need, and how you plan to repay it.
Attach all the documents the lender requested: tax returns, bank statements, credit report, proof of collateral, and a brief explanation of what the loan is for. If you're buying equipment, include a quote from the seller. If you're using the money for working capital, explain why and how it will help your business grow or stay afloat.
For SBA loans, you may also need a personal financial statement (a form listing your personal assets and debts) and a business plan or one-page business summary. Ask the lender whether they want a full plan or just a summary.
What Happens After You Submit
The lender will review your process and documents, usually within one to two weeks. They may call you with questions about your tax returns, your business, or how you plan to use the money. Answer honestly and promptly — delays here slow down the whole process.
The lender will also order a credit report and may verify your income by contacting your accountant or the IRS. For larger loans or SBA loans, they may send someone to inspect collateral or visit your business location.
Once the lender approves the loan, you'll sign loan documents that spell out the interest rate, repayment schedule, and what happens if you miss a payment. Read these carefully before signing. After you sign, the lender will fund the loan — usually within a few business days — by depositing money into your business bank account or sending a check.
What to Do If You're Turned Down
If a lender says no, ask why. Common reasons are a credit score that's too low, not enough time in business, insufficient collateral, or a business plan that doesn't convince them you can repay. Some of these you can fix: paying down debt to raise your credit score, waiting a few more months if your business is very new, or finding a co-signer with better credit.
Try a different lender — credit unions and microloans often have looser standards than banks. You can also ask the SBA about their Microloan or Community Advantage programs, which are designed for borrowers who don't meet conventional lending standards.
If you're consistently turned down, consider whether you actually need a loan right now. Some businesses grow faster by reinvesting profits or finding investors rather than borrowing.
Frequently Asked Questions
How much can I borrow?
It depends on the lender and loan type. SBA 7(a) loans go up to $5 million. Conventional bank loans vary by bank but often range from $25,000 to $500,000 or more. Microloans typically max out at $50,000. The lender will also consider how much your business can realistically repay based on your income and existing debts.
What if my business is less than two years old?
Most conventional lenders want two years of tax returns, but microloans and some credit unions will work with newer businesses. You'll need to show strong personal credit, have collateral, or bring in a co-signer. Some lenders will accept one year of returns plus a detailed business plan showing why you expect to succeed.
Do I need collateral?
Most lenders want collateral or a personal may provide, meaning you promise to repay the loan personally if the business can't. Some microloans and SBA loans have more flexible collateral rules. Ask the lender upfront what they'll accept — it might be business equipment, real estate, or a lien on your business assets.
How long does the whole process take?
Conventional bank loans usually take three to four weeks from process to funding. SBA loans take six to eight weeks or longer because the SBA reviews the process after the bank approves it. Microloans can close in two to three weeks. The timeline depends on how quickly you submit documents and how busy the lender is.
What if I have bad credit?
A low credit score makes borrowing harder but not impossible. Microloans, credit unions, and the SBA's Community Advantage program work with borrowers who have scores below 620. You may pay a higher interest rate or need a co-signer with better credit. Paying down existing debt before you explore can also help raise your score.