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Business loans can provide the funds you require to purchase inventory or equipment or finance expansion of your business or pay employees, and also cover other expenses. Before applying, make sure you understand how loans work and what kind of documentation you’ll need to submit to your lender. Be aware of the length of time required to complete an application and any fees that may be charged.

Common uses for business loans

A business loan could help you pay for unexpected expenses, such as a damaged chair at work or the COVID-19 Pandemic. You may also need to borrow funds to finance the cost of an investment that is not necessary, such as upgrading or replacing technology, buying manufacturing equipment, or renovating a store. Some lenders offer lines of credit that allow you to draw funds whenever you need it, with a set maximum and interest only charged on the amount you use.

The application process and eligibility requirements

To be eligible for a business loan, you’ll need to provide specific details about your company, which includes the official name of the business as well as the tax ID number. financial documentation. This might include business plans, proposals, and profit and loss statements, as well as the names and Social Security numbers of those who control 20 percent to 25 percent or more of your business. Some lenders require you to be in business for at least one year. Others are open to startups, or do not have time-frame requirements.

A mentor or adviser can guide you through the business loan process. SCORE is a good example. It has a network of business mentors who provide advice for free or at a low cost to startup founders and small businesses. Find an area chapter and meet an advisor in person.