Find out how much you could borrow before applying for a business loan. Understanding how business loans work can save you money and help you stay within your budget.
How much will you borrow?
Understanding How Much You Can Qualify For
If you’re not sure how much money you’re eligible to borrow for your business, using a business loan calculator can help you find the loan amount you may qualify for. Keep in mind, certain aspects of your business’ financial health can also make a difference in the loan amount you qualify for.
Business Earnings and Start Date:Showing the month and year your business was started as well as the annual gross revenue of your company can help lenders determine if your business is established enough to handle debt. Lenders will want to make sure that your business generates enough money to be able to make payments on the amount you’re borrowing.
Recent Bank Deposits:Just like knowing your business’ total earnings, it’s also important for lenders to know how much money your business has on hand every month. When applying for a business loan, you might be required to include your business’ bank statements in your application.
Credit Score: If your credit is considered to be good or excellent, you may qualify for a larger loan amount, if your credit is considered fair or poor, your loan amount may be less. Businesses can also have their own credit score. If your business boasts a strong credit profile, you may be able to obtain more funds, even if your personal credit score isn’t as high.
Home Based Businesses:Is your business based out of your personal residence? If so, you may have fewer assets to offer as collateral for a loan. With some lenders, having a home based business may impact the final loan amount you qualify for.
It’s important to note that these are just a few of the things lenders may require when navigating the business loan application process. You may encounter the need for a copy of your business plan, expected earnings, collateral, and more. All of these things could impact the final loan amount you qualify for.
Payments for Small Business Loans
There are a variety of factors that could impact your small business loan payments, including:
Total Loan Amount
Some business loans can range from as low as $5,000 all the way up to over $1 million. Some of that actually depends on the lender; not all institutions (or lenders on our network) will or can offer million dollar loans.
There are also different types of loans that have total caps on the amount you can finance. U.S Small Business Administration Loans offer loans as large as $5 million. Many small business also opt to obtain equipment loans for specific business purchases, these loans can total up to $1 million.
There are a variety of fees associated with obtaining a business loan. You might not encounter all of these, but it’s good to be prepared for additional costs. These fees could include:
Origination Fee: covers the approval and processing of your loan.
Service Fee: covers the maintenance of your account.
Late Fee: charged when a late payment is made on your account.
Prepayment Penalty: a fee that may be charged if you pay off your loan early.
Interest rates vary from lender to lender, however there are a few common forms of interest associated with most loans.
Annual Percentage Rate (APR): refers to the compounding annual interest on your loan. Loan APR also includes other loan fees and closing costs.
Annual Interest Rate (AIR): Similar to APR, this rate includes the compounding annual interest of your loan but does not include any other fees.
Factor Rate: shows the total cost of financing the loan as a decimal figure by multiplying the original loan amount. This rate does not include any loan fees.
Your loan term refers to the amount of time you’ll have to pay off your loan. Loan terms may span from several months up to many years. These terms depend on your lender and loan agreement.
SBA loans can span up to 10 to 25 years while bank loans may span as long as 10 years. It’s important to remember that in most scenarios, a shorter loan term results in higher monthly payments (though that also means your loan is paid off faster).
Finding Business Loans
After assessing your business needs and figuring out how much you need to borrow, it’s time to start looking for the right place to obtain your loan, and well, you’re already here reading this page, so you’re on the right track! Let’s review some of the alternatives.
Bank loans are usually the most traditional route of funding for businesses, and qualifying and obtaining one can be a long and tedious process. If you’ve been a long time customer of a certain financial institution, you may qualify for a better rate there than if you were to choose another route of funding. The downside of going to a single bank is you don’t get competing offers. The lenders on our network compete for your business, ensuring you get the most competitive rate for your situation.
Online business loans are becoming more prominent and offer fast funding and fewer borrowing requirements. SnapCap specializes in finding alternative funding. We pride ourselves on connecting businesses with the funds they need, faster than they would find them through traditional means. If this is the route you want to go, you’re already on the right site. You can start your loan search from this page.
The U.S Small Business Association offers loans issued through banks. With SBA loans, there is generally less of a risk to lenders, making the approval process easier for those looking to apply. SBA loans also have rate caps to ensure that loan costs stay relatively low, making this loan a highly desirable option. There are specific requirements that must be fulfilled to qualify for SBA loans.
Remember, it’s always a good idea to weigh your options and shop around for loan offers, when you’re talking about thousands of dollars, spending the extra time to find a better rate can result in saving a lot of money.
We Know Small Business
Over the last decade, we’ve helped secure nearly $1B in total funding, and we’ve learned a thing or two about business financing. In our experience, this process works best when you’ve got a partner. That’s us. SnapCap was created to support growing businesses by connecting them with credit when they need it — without the hassle. Let’s see what we can achieve together.
Get pre-qualified for up to $1M
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