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Are You Ready To Apply For A Small Business Loan?

Small business loans have become an important financing tool in the last few months, as business owners have used these credit lines to strengthen their cash positions while their businesses reopen after lockdowns.

Are you considering using this financial aid? Throughout the following article, you’ll learn the key characteristics of these loans, and the main requirements and paperwork your business must fulfill to apply for one.

How Do Small Business Loans Work?

According to the Small Business Administration (SBA) agency in the US, a small business has between 1 and 1,500 employees –the minimum varies per industry– and they generate a maximum amount of annual receipts of $38.5 million.

These businesses have unique characteristics including that they operate under more stringent cash cycles, and they typically require external funds to finance their expansion projects.

Small business loans have been designed by banks, government agencies, and financial services firms –such as Camino Financial– to provide business owners with a financial product that aims to fulfill their businesses’ particular needs.

The amount you can borrow with these loans may go from a few thousand dollars to a few million, depending on the size of the business and its financial situation.

Companies like Camino Financial, for example, offer as much as 60 months to repay the loan with interest rates varying from 1% to 2.5% per month.

The Purpose Of Small Business Loans

Small business loans can be used for many purposes. This is one of their key benefits compared to mortgages or industrial loans.

Business owners can use the funds obtained from small business loans to cover operating expenses (salaries, rent, utilities, etc.) or to increase their inventory during high demand season. They can also be used to strengthen the business’ cash flow while sales are down as a result of the pandemic.

Most Common Requirements To Apply For A Business Loan

Applying for a small business loan is easier than ever now that fintech companies have taken advantage of the internet to offer expedite applications and approval times, in contrast with the usual painstaking process of traditional loans.

Here’s a list of some of the most common requirements that financial institutions in the US request:

  • A minimum of nine months of activity.
  • At least $30,000 in annual sales or a minimum of $2,500 per month.
  • The business owner must have a FICO credit score of at least 550.

The application process will only take a few minutes, and it can be completed online. It’ll mainly consist of filing a few forms with basic contact and financial information.

Once the loan is pre-approved, fintech companies usually require a few extra documents, such as tax returns and bank statements. If the amount of the loan exceeds a certain threshold, a business plan will also be required.

When the requirements are fulfilled, the funds will be typically received in the company’s bank account within one or two business days. This is one of the reasons these loans are highly appreciated by business owners, especially in a situation where cash needs can emerge with very short notice.

How Convenient Are Small Business Loans?

Whether the funds will be used to cover a temporary cash-flow gap or to finance a renovation, small business loans are a convenient alternative for small companies seeking to fulfill their short-term cash needs.

The easiness of the application process and the speed of the approvals make them a more reliable choice, compared to the options offered by traditional institutions. Although they can be a bit more expensive, they still provide an element of convenience that is hard to overlook.

TechSmashers
Tech Smashers is a global platform that provides the latest reviews & news updates on Technology, Business Ideas, Gadgets, Digital Marketing, Mobiles, Updates On Social Media and many more up coming Trends.

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