How to Get a Small Business Loan in 2026
If you’re considering getting a small business loan, it’s important to understand the whole process in order to increase your chances of approval. While it can be a complex process, it can be easier to attack when broken down into steps. After you’ve determined how funds will be used for your business, you’ll need to understand the available loan options, ensure you can afford the payments, compare your qualifications to those of the loan program, and then apply and provide documentation to the lender.
I’ll help you navigate through the details of each step, provide insight into what to expect after you’ve applied, and offer recommendations on how you can improve your approval odds. That said, here’s my guide on how to get a loan for a small business:
Step 1: Determine how funds will be utilized
Before considering any type of financing, you should thoroughly plan how you’ll use the funds provided towards your business. This includes the items you intend to purchase, the funding you may need, and the expected return on investment.
- Funding amount: Asking for too little funding can result in setbacks to your business if you’re only able to partially fund certain projects or goals. Requesting too much funding can also be less than ideal, as it can result in your loan application being denied or cause you to pay more fees and interest charges than is necessary.
- Usage of funds: How you use funds can determine the loan types you’ll be eligible for. This is important because certain types of financing programs offer more competitive rates and terms.
- Expected return on investment (ROI): In most cases, you should only get a small business loan if you’ll get a positive ROI. In addition to the monetary aspects of how the loan can help your business in the long term, consider other areas in which the funds can help your company. This might include marketing, inventory, human resources, or even data management.
Step 2: Understand your loan options
After you’ve pinpointed exactly how you’ll be using the funds, the next step is to understand the types of loans available to you. Because your eligibility can vary based on your intended use of funds, it’s important to know the types of loans and their applicable terms. By narrowing down your options, you can save time and identify the program best suited for your needs so that you get the best rates and terms.
- Equipment financing: Lenders that offer equipment financing can help you obtain vehicles, machinery, furniture, or other equipment used in running your business. You can choose to get an:
- Equipment loan if you want to retain ownership after the loan is paid off; or
- Equipment lease if you want to return the equipment at the end of the term
- Working capital loans: These are short-term loans designed to help cover your day-to-day expenses, such as payroll, inventory, rent, and other operational costs. For options, see our roundup of the best working capital loans.
- Startup business loans: Startup loans can give you the cash needed to launch your business. While rates can be higher, they can be a good option if you’re unable to obtain financing from other sources.
- Small Business Administration (SBA) loans: SBA loans generally require good credit and strong business finances. If you qualify, these loans can offer competitive rates and fees.
- Business acquisition loans: If you want to acquire another business, a business acquisition loan can give you the necessary funds. Depending on the specific terms of your loan, it can also be used to provide cash flow for a short period to ensure a successful launch. Our guide on how to get a loan to buy a business will walk you through the process.
- Commercial real estate (CRE) loans: CRE loans are used for purchasing, building, or renovating a commercial property, which can include warehouses, storefronts, office spaces, and production facilities. Often, CRE loan rates are reasonable.
- Accounts receivable (A/R) financing: If your company has sent invoices to customers that have not yet been paid, A/R financing can advance you a percentage of the amount you are expected to receive.
- Merchant cash advances (MCAs): Businesses with a large volume of credit card receipts can use an MCA to receive an advance payment. In exchange, you agree to give the financing company a percentage of the sales.
- Purchase order (PO) financing: PO financing can be helpful if you receive large orders from customers that require a third-party supplier to help fulfill. If approved, a PO financing company will pay your supplier to complete the order. You will send an invoice to the customer, who will then make payment to the PO financing company.
Step 3: Evaluate affordability and acceptable loan terms
Whether or not a lender decides to approve your application, you should familiarize yourself with the loan terms and make sure you understand how they fit within your business plan and timeline. Consider the following:
- Payment amount and frequency: Ensure that the repayment schedule and payment align with your budget, and won’t strain your business finances. Loans that require more frequent payments, like on a daily or weekly basis, may negatively impact your cash flow.
- Fixed vs variable interest rate: Loans with a variable interest rate can mean your payments may fluctuate up or down, while fixed rates typically mean you’ll have more predictable fixed payments until the loan is paid off.
- Amortization schedule: Fully amortized loans are paid off at the end of the term if you follow the regular payment schedule, and you can create this yourself with our guide on using Excel to create an amortization schedule. Other loans, however, may require a larger payment. For instance, loans with a balloon payment could require a larger single lump sum payment to be made at the end of the loan term.
- Access to additional funds: Some loans, such as small business credit lines, allow you to draw funds on an as-needed basis. Most term loans, on the other hand, issue funds in a single disbursement and require you to submit a new loan application if you need additional funding.
- Fees: Read the terms of your loan to determine what fees may apply to your circumstances. If you plan on paying off the loan early, for instance, you may want to ensure there are no prepayment or early payoff penalties. Other common costs include inactivity, early closure, minimum draw, and annual fees.
Step 4: Review your qualifications
Specific qualification requirements can vary widely based on the lender and loan program you choose, and these requirements may not always be publicly disclosed. However, understanding the strength of your loan application will allow you to be proactive in improving your chances of getting approved at the best rate.
Below, I’ve listed some of the most common areas lenders review when evaluating your eligibility for financing:
- Credit scores: A personal FICO credit score above 680 and a business FICO SBSS credit score higher than 155 will generally be good enough to get you qualified for most types of loans. You can still get financing with lower scores, although you may be ineligible for a lender’s best rates. Learn more about credit scores in our guides on how a business credit score works and how to fix bad credit.
- Credit report: Regardless of your credit scores, specific items on your credit report can disqualify you from financing. For example, a lender’s eligibility criteria may not allow funding to be issued to individuals with recent foreclosures, bankruptcies, or other significant delinquencies. You can better understand a business credit report by reading our guide.
- Time in business: If you’ve been in business for at least two years, your financing opportunities are much greater than those with limited time in business. This is because lenders know that issuing funds to a newer company can be risky. If you don’t have two years of operation, you may be better off considering startup loans.
- Business finances: Annual revenue, income trends, and various financial ratios, such as debt-to-income (DTI) and debt service coverage ratio (DSCR), are commonly reviewed to determine your ability to handle additional debt payments. In general, having a DTI ratio below 45% and a DSCR above 1.25x is considered favorable and can increase your odds of approval.
- Collateral or personal guarantee: These act as security to lower a lender’s risk when issuing financing. While not always a requirement, it is a common scenario that lenders will request it. Essentially, pledging collateral for a loan allows a lender to take possession of it in the event of a default, while providing a personal guarantee puts a borrower’s personal assets at risk should the business be unable to pay.
- Down payment:While not always necessary, for loans that require a downpayment, 20% or more is generally considered strong for a loan and can help get you approved at the best rates. However, the exact amount can vary based on the strength of your credit and finances.
Step 5: Shop lenders & submit applications
You can get a small business loan at many banks, credit unions, and online brokers, and each has its own set of pros and cons. You should also prioritize what aspects of a loan are most important to you and what you can do without. Before making any final decisions, you should shop around with multiple lenders and obtain several quotes, as this will improve your chances of finding the lender and loan type best suited for your needs.
Types of lenders
How to choose a lender
To help you find the best lender, the following list can help you to determine which items are most important to you:
- Eligibility criteria
- Loans offered
- Rates and fees charged
- Monthly payment and loan terms
- Speed of funding
- Lender’s expertise with your industry and loan type
- Hours of operation and customer service availability
- Customer ratings
- Branch locations
Commonly required loan documentation
Getting financing often requires various forms of documentation as part of the process, regardless of the loan type or lender. While it can be tedious, preparing these documents ahead of time can help you get funded more quickly. For more details, check out our guide on common small business loan requirements.
- Tax returns: Many lenders will require your personal tax returns from the past two years. If you have filed an extension, a third year may be required. You can also be asked to provide business tax returns for every company that you have a 20% or more ownership interest in.
- Financial statements: Depending on the type of loan you’re applying for, you can be asked to provide additional documents like profit and loss (P&L) statements, cash flow statements, or balance sheets. Lenders may request current year-to-date figures as well. To avoid any delays, you can prepare these ahead of time.
- Bank statements: As proof of current business activity and revenue earned, you may need to provide your most recent 2 to 3 months of bank statements. In some cases, the lender may request explanations for things like unusual deposits.
- Loan statements: If your credit report does not contain sufficient information on your financial obligations, your lender may ask you for more information. Be prepared to provide loan statements, lease agreements, promissory notes, or other items that show the terms of any loan you are responsible for.
What to expect after applying
Once you’ve gathered all the proper information and documentation required for your loan application, the lender will review it to determine your eligibility. This generally looks like the following:
1. Loan underwriting
Loan underwriting is the process by which a lender reviews your application to determine if it meets its eligibility criteria. Your file will be reviewed in detail, and you may be asked to clarify items by providing explanations or additional documents. The timeline of this can vary based on the loan type and lender, but it typically takes several days to one week to receive a decision on your loan, although some of the best fast business loans can issue a decision in under 24 hours.
2. Terms of approval review
If approved for the loan, your lender will provide you with disclosures detailing your loan terms. It will also indicate any additional requirements that must be met. Loan terms will include your rate, fees, repayment conditions, and loan amount.
However, if you were denied and you would like the lender to reconsider your loan for better terms, you can discuss the details that led to the lender’s decision. If there are any discrepancies, you can provide the lender with additional documentation to review.
3. Loan documents signing
If you agree to the loan terms and want to proceed with funding, you’ll need to sign the required documents, such as the loan agreement. Once signed, the documents will be reviewed by the lender to ensure the paperwork was completed and signed properly, at which point your loan will be funded.
Frequently asked questions (FAQs)
The timeline of getting a small business loan varies based on the loan type and lender. That said, it can range anywhere from a few months to as little as 24 hours, depending on the complexity of your business finances.
The best time to apply is when your company’s credit is good and your company is financially stable. This can help you get approved because lenders look at historical trends to determine the likelihood of your business continuing to grow and its ability to pay debts on time.
Yes, it is possible to get a loan with bad credit, but it might be more difficult to get one. Many lenders offer flexibility for businesses with less-than-ideal credit, but be prepared for rates and fees to potentially be higher. You can view our picks for the best bad credit business loans for some options.
Yes. Startup loans are available through some lenders, but keep in mind you might not qualify for the best rates as a newer company with limited credit and business history. Check out our guide on the best ways to fund a startup for options that may be right for you.
There is no limit to how frequently you can apply for a small business loan. However, your credit score may be negatively affected when a lender conducts a hard pull of your credit, so you may want to limit your applications to lenders where you have a good chance of getting approved.
Bottom line
A small business in need of a business loan can go about it in a few different ways. However, if you follow my recommended steps, there’s a good chance you’ll be able to start the process confidently and find a loan that meets your business needs. By understanding your loan options and what the loan process involves, you can better prepare yourself and improve your chances of getting approved.
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