How to Get a Business Loan For The First Time

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First Time Small Business Loans

Before you decide to take out a small business loan, it’s important to figure out not just the amount that you need, but also the reason why you want to borrow.

These reasons can range from starting a new business from scratch and purchasing new equipment to funding immediate financial needs after a disaster or major theft. In addition to your personal qualifications, your borrowing purpose will determine what kind of loan and which lender is right for you.

Starting a business: If you’re just starting a new business, getting a startup loan may be the right option for you. A startup loan can help you fund the initial costs associated with a new business including hiring costs, new equipment, and new office space.

Buying a business: Buying a business is a very different process than starting a new business. When you buy a business, you may be taking on an already-established set of employees, workspaces, materials, and revenue history. Getting a loan for this purpose can be easier than borrowing to start a business.

Day to Day working capital: You may need to finance the daily expenses associated with running your business. A working capital loan can help you fund business basics from payroll to marketing costs.

Grow Your Business: Whether it means buying a new property or new equipment, if you want to grow your business but don’t have the out-of-pocket cash to fund your plan, you might turn to a small business loan.

Emergency Spending: Sudden events like damages, disasters, or theft may require immediate funding.

Equipment Financing: You might need a loan to purchase new company vehicles, machinery, factory equipment, or computers for your business.

Invoice Financing: If you have several unpaid customer invoices, your business may be missing a revenue stream that is necessary to keep the company afloat. An invoice factoring or financing service can help you with that.

Can I get a loan if I just started my business?

There are a number of loan programs specifically designed for startups and small businesses. However, getting approved for a loan can be a challenge for new business owners. Lenders typically like to see a strong business plan, sales history, and solid financials.

If you're just starting out, you may not have all of these things yet - but that doesn't mean you're out of luck. There are still a few avenues you can explore. For instance, the SBA offers microloans for businesses that need smaller amounts of financing. You might also consider working with a local credit union or community bank, which may be more willing to take a chance on a new business owner. Another option could be using a personal loan until your business is more established. 

What size of loan can I obtain if I’m applying for the first time?

The amount you’ll qualify for will depend on a variety of factors, including what you can afford to repay. Generally, first-time business loan applicants can expect to receive smaller loans than those with established businesses and strong credit histories. However, there are a number of programs available that can help first-time applicants obtain the financing they need. 

The Small Business Administration, for example, provides guarantees for certain types of loans, making it easier for borrowers to obtain the financing they need. First-time applicants should also consider working with a local bank or credit union, as these lenders may be more willing to work with new businesses. 

By doing some research and exploring all their options, first-time business loan applicants can increase their chances of getting the financing they need.

What credit score do I need to qualify as a first time borrower?

To qualify for a business loan, you should have a credit score of at least 640. As a new business owner, lenders will often reflect on your personal credit score. While credit score requirements can vary depending on the lender, in most cases you’ll need a good credit score. A good credit score can also help you lock in lower rates which can save you money.

If your credit score is below 640, you may still be able to get a loan, but you will likely have to pay a higher interest rate. If you have a very low credit score, you may not be able to get a loan at all or you may need to secure the loan with collateral. 

Do I need to put a downpayment when getting a first time business loan?

When you’re starting a business, there are a lot of things to think about – and one of the most important is finances. When you’re looking for a loan, you may be wondering if you need to put down a downpayment. The answer depends on the lender and the type of loan you’re seeking. 

Typically, conventional lenders will require a downpayment, while SBA loans may not. However, even if you’re not required to put down a downpayment, it may be in your best interest to do so. A downpayment shows that you’re invested in your business and willing to take on some financial risk. As a result, it may make it easier to get approved for a loan. 

So, when it comes to deciding whether or not to make a downpayment on your first business loan, it’s important to weigh all of your options carefully.

How to Get a Loan for a First Time Business

Starting a business is an exciting, yet challenging undertaking. It takes vision backed by the right resources which often includes money. Before applying for a business loan there are a few things you should prepare. 

Create your story

The first step is to develop a strong business plan. This will give you a roadmap for your business and will help you attract potential investors or lenders. Once you have a solid plan in place, you can start approaching banks and other lenders for financing.

Be sure to put together a strong business plan and tell a compelling story about your company in order to increase your chances of getting approved for a loan.

Build your credit

Building credit is an important first step in securing a business loan. Potential lenders will want to see that you have a history of managing your finances responsibly.

A good credit score will give you a better chance of being approved for a loan and getting a lower interest rate. So how can you build your credit? One way is to make sure you always pay your bills on time. You can also use a credit card responsibly by making small charges and paying off the balance each month. 

By taking these steps, you can improve your chances of securing the financing you need to grow your business.

That said, be prepared to offer collateral for your loan. This could include personal assets such as your home or your savings account. Lenders will also want to see that you have a good credit history and that you're able to repay the loan on time.

Choose the loan best for your needs

There are many options available when it comes to business loans. The best loan for your needs will depend on a variety of factors, including the amount of money you need to borrow, the terms of the loan, and the interest rate. It's important to compare different loans before making a decision, and make sure you understand all the terms and conditions. 

Once you've chosen the loan that's right for your business, the next step is to fill out an application. Depending on the lender, you may be able to apply online or in person. Most applications will require some basic information about your business, such as financial statements and tax returns. 

Once you've submitted your application, the lender will review it and determine whether or not you're approved for the loan. If you are approved, you'll usually receive the money within a few days.

Can I obtain a first time business loan with fair credit?

The short answer is yes, it’s possible to obtain a first time business loan with fair credit. However, it may be more difficult to qualify for loans with favorable terms and rates. Lenders will typically consider factors such as the borrower's credit history, business revenue and cash flow when making decisions about loan approvals and terms. 

Borrowers with fair credit may need to provide additional documentation or collateral to secure a loan. However, there are a number of lenders who specialize in working with businesses that have fair credit, so it’s worth doing some research to find the best fit for your needs. By taking the time to shop around and compare offers, you stand a good chance of securing the financing you need to get your business off the ground. PrimeRates makes it easy to shop and compare all types of business loan offers without impacting your credit score.

Tips to Solidify Your Business Plan

With so many different types of loans, lenders, and amounts, choosing the right small business loan can seem like a daunting task. Developing a business plan before applying for a loan can not only help you understand the direction of your business and your financial needs but will also help you determine whether a loan will make it easier for you to meet those needs or not.

Because loans come with extra fees and interest, it’s important to make sure that you need the money you want to borrow. Having a well-thought-out business plan will guide you in your decisions on both the type of loan you need and your desired amount.

The urgency with which you need the money also makes a difference; If you have financial needs for your business that can wait three months to be funded, you might be eligible for a loan with a lower interest rate.

Not only is your plan an important component of understanding your entrepreneurial goals, but many lenders also require a comprehensive business plan with your loan application. Along with revenue history and debt-to-income ratio, your plan can be a deciding factor in what loan amounts and rates you are offered.

Small Business Lenders for First Time Borrowers

Once you have developed your business plan and determined your budget, the reason for borrowing, and desired loan amount, it’s time to figure out what kind of lender will best fit your needs.

Use Online Lenders: Online lenders offer large loan amounts and typically have faster funding times than traditional bank loans. Whereas with a traditional business loan the borrower may have to wait up to three months, online loans are often dispersed within one business day to a week.

Additionally, online loans usually have simpler applications and faster decision times, with some lenders giving applicants a decision within minutes.

This type of lender may be worth looking into if you have immediate or short-term financial needs, such as repairing unexpected damages or purchasing new supplies.

SBA Loans: SBA loans are offered by banks and other lenders and are guaranteed by the Small Business Administration. These often have higher lending ceilings and lower rates than online lenders offer. Their repayment periods are based on borrowing purposes. For example, the typical term for working capital is seven years while the term for real estate expansion is 25 years.

These loans are, however, more difficult to qualify for and slower to fund, so they’re best for businesses without immediate cash needs.

Short-Term Business Loans: Similar to term or personal loans, these loans are issued in one lump sum. However, they usually have a maximum repayment term of one year and are typically repaid within 120 days.

This type of loan is ideal for seasonal or retail businesses with needs such as inventory expansion, payroll payments, and covering expenses while waiting for customer invoice payments.

Business Lines of Credit: While loans are usually issued to the borrower in one lump sum, a business line of credit allows you to borrow funds as you need them, as long as they don’t exceed the given credit limit. You also only pay interest on what you’ve borrowed.

A line of credit can be good for recurring expenses such as materials, utility bills or employee travel.

Prepare Paperwork/Documents

Most loan applications require cash flow projects, a comprehensive business plan and projected financial statements.

While gathering all of the necessary documents for a loan application can require a lot of time and energy, it’s important that your documents and application are as detailed as possible. Be prepared to take the time to thoroughly answer all of the questions.

If you’re applying for an SBA or USDA loan, you should also be ready to submit documents to both the federal government and the lender.


Once you have identified your loan purpose, written a business plan, and gathered all of your documents, you are ready to apply!

As long as you understand why and how much you are borrowing, and have all of the necessary paperwork, applying for a loan should be a smooth process. As different lenders have varying requirements, make sure to take the time to compare a few different quotes before making a final decision.

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