If you Owe more than $30,000 contact us for a case evaluation at (833) 428-0937
contact us for a free case evaluation at (833) 428-0937
Call us (833) 428-0937

The Do's and Don'ts of Getting a Business Loan for Your Small Business

If you're interested in getting a business loan for your small business, there are some important do's and don'ts you'll need to keep in mind.

Book a Consultation Call

The Do's and Don'ts of Getting a Business Loan for Your Small Business

Are you considering getting a business loan for your small business? Do you already have one? Either way, it's important to know the do's and don'ts.

Small business loan approval rates are on the rise, and more small business owners are getting the full amount of the loan they're requesting.

If you're interested in getting a business loan for your small business, there are some important do's and don'ts you'll need to keep in mind.

These guidelines will help you make the right decisions and increase your chances of getting all the money you need to get your business off the ground.

Types of Business Loans

Getting a business loan

Before diving into the specific dos and don'ts of getting a business loan, it's important to understand some of the different types of small business loans and their repayment terms

Term Loans

This involves receiving a lump sum of money that you will repay over a predetermined period of time with interest.

SBA Loans

These SBA loans are guaranteed by the Small Business Administration. They typically have lower interest rates and longer repayment terms.

Business Line of Credit

This gives you access to money up to a specific limit. You only pay interest on the money you've withdrawn.

Equipment Loans

As the name suggests, this type of loan is meant specifically to help you purchase the equipment you need for your business. The equipment serves as collateral for the loan.

Business Credit Cards

Business credit cards are revolving lines of credit. You can draw from and repay them as often as needed. They're typically best when used for financing ongoing expenses like travel or utilities.

Do's of Getting a Business Loan

When it comes to seeking out a business loan for your small business, you must be sure to keep these guidelines in mind:

Do Know Your Credit Score

Small business owners who are aware of their business credit scores are 41 percent more likely to get approved when they apply for a business loan.

Your personal credit score makes a difference, too. It tells potential lenders a lot about your financial habits.

Do Get a Business Bank Account

One of the easiest ways to keep your finances in check is to use a separate bank account for your business. Keeping them separate actually decreases your chances of being turned down for a loan, too.

Do Consider All Your Options

There are lots of lenders out there. You can even find lots of online lenders with rates and repayment options that are in line with or better than the options offered by traditional banks and credit unions. Take your time and look at all the different choices before making a decision.

Do Keep Necessary Documents on Hand

There are a lot of documents you'll need to have on hand when you're applying for a business loan. Some specific documents you ought to keep easily accessible include:

  • Tax returns
  • Financial statements
  • Business plan
  • Articles of incorporation

Carefully review what each loan requires and have that information ready to go so that you're prepared.

Do Learn from Past Mistakes

Many small business owners who are denied financing don't know why their applications get denied. These small business owners often tend to get turned down more than once, often because they don't learn from the mistakes they made the first time around.

Do Use a Business Loan Calculator

There are more costs associated with a business loan than just the amount you're seeking to borrow. From interest rates to the APR, there are other costs you need to keep in mind. Use a loan calculator so that you understand the true cost of your loan before deciding whether or not it's right for you.

Do Work with an Expert

Finally, remember that you don't have to go through the loan application all by yourself. There's nothing wrong with taking advantage of all the resources out there and working with an expert.Â

Get in touch with someone at your local SBA office. They can put you in touch with a mentor who will give you the advice you need to increase your chances of getting approved.

Don'ts of Getting a Business Loan

At the same time, there are also some things you ought to avoid if you want to increase your chances of your loan request getting approved:

Don't Limit Yourself to Your Local Bank

Many business owners make the mistake of only looking for loans from their local bank or credit union. Remember, there are lots of alternative lenders out there. Don't be afraid to seek them out.

Don't Overestimate Your Income

No matter how optimistic you are, chances are your income is not going to be as high in your first year as you predict.

Go over your budget, then decrease your income by 25-50 percent. You'll be more likely to get approved for your loan if you're realistic.

Don't Underestimate Your Expenses

At the same time, don't underestimate the expenses you'll be met with as you're getting your business off the ground. Go back over your budget and increase your expenses, just to be safe.Â

Don't be Vague

When you apply for a business loan, lenders will ask you how much money you want and what you're going to use it for.

Be specific about the amount you want and your intentions for that money. Don't beat around the bush -- lenders want to see that you've got a specific plan.

Don't Borrow from a Disreputable Lender

Finally, while there's nothing wrong with seeking out a loan from an alternative lender, it's still important to ensure that your potential lender is a reputable one. Remember, if their offer seems too good to be true, it probably is.

Do You Need Help With Your Defaulted SBA Loan?

If you have defaulted on an SBA loan, our experienced SBA attorneys offer assertive legal representation.

We can help at Protect Law Group. Contact us today to schedule a consultation.

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

construction accident injury lawyer

Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure

slip and fall attorney

Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements

truck accident injury attorney

Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.

$150,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$150,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

The client personally guaranteed an SBA 7(a) loan for $150,000. His business revenue decreased significantly causing default and an accelerated balance of $143,000. The client received the SBA's Official 60-day notice with the debt scheduled for referral to the Treasury’s Bureau of Fiscal Service for aggressive collection in less than 26 days. We were hired to represent him, respond to the SBA's Official 60-day notice, and prevent enforced collection by the Treasury and the Department of Justice. We successfully negotiated a structured workout with an extended maturity date that included a reduction of the 14% interest rate and removal of substantial collection fees (30% of the loan balance), effectively saving the client over $242,000.

$350,000 SBA 7A LOAN - NEGOTIATED STRUCTURED WORKOUT AGREEMENT

$350,000 SBA 7A LOAN - NEGOTIATED STRUCTURED WORKOUT AGREEMENT

Client personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.

$488,000 SBA 7A LOAN - SBA OHA LITIGATION

$488,000 SBA 7A LOAN - SBA OHA LITIGATION

The clients are personally guaranteed an SBA 7(a) loan.  The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients.  We initially filed a Cross-Servicing Dispute, which was denied.  As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services.  Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.

Read more Case Results

Related Content

Read more sba debt articles