Starting or growing a small business often requires capital — and a small business loan is one of the most common ways entrepreneurs fund equipment, payroll, inventory, or expansion. The process can feel intimidating, but with the right preparation and knowledge, you can improve your chances of approval and secure financing that fits your goals.
This long-form, SEO-optimized guide explains how to get a small business loan in the U.S. — step by step. You’ll learn the different loan types, what lenders look for, the documents to prepare, how to choose the best lender for your needs, and practical tips to increase your approval odds. The tone is empathetic, reassuring, and professional: we walk with you through the entire journey.
Quick overview: the lending landscape in 2025
Small business financing in the U.S. comes from a mix of sources: big banks, community banks, credit unions, online lenders, fintech platforms, and government-backed programs (most prominently the Small Business Administration). The SBA guarantees loans that lenders otherwise would consider too risky, which expands options for many entrepreneurs. SBA programs — including 7(a), 504, and microloans — remain the backbone of small business lending and cover amounts from a few thousand dollars to several million. SBA+1
The federal government and banking regulators also track credit conditions closely. The Federal Reserve and related surveys emphasize that access to credit remains a challenge for hundreds of thousands of small businesses, particularly for smaller-dollar loans and for underrepresented entrepreneurs — but programs and lender innovations are helping fill gaps. fedsmallbusiness.org+1
Which loan is right for your business? (short guide)
Understanding loan types is the most important early decision. Here’s a quick comparison:
- SBA 7(a) loans — SBA’s flagship loan for working capital, equipment, and real estate. Loan guarantees increase lender willingness; amounts can reach into the millions. Good for established small businesses needing larger or long-term financing. SBA
- SBA 504 loans — Designed for fixed assets such as real estate and heavy equipment; works with certified development companies (CDCs).
- SBA Microloans — Small loans (up to $50,000; average about $13,000) administered through nonprofit intermediaries; great for very small startups and borrowers needing small-dollar capital. SBA
- Traditional bank term loans — Fixed amounts with set repayment schedules; often require stronger credit and collateral.
- Business line of credit — Revolving access to funds for seasonal needs or cash-flow gaps.
- Online lenders & marketplace lenders — Faster decisions and funding, but usually higher costs; good for borrowers needing speed or who don’t qualify for bank loans.
- Alternative financing (merchant cash advances, invoice factoring) — Short-term, expensive options for urgent cash needs.
If you qualify for SBA financing, it’s often a favorable route (better terms/longer amortization) — but SBA loans take longer to process than online alternatives. Expect process time from application to funding to commonly be 30–90 days for SBA 7(a) and 504 programs (faster for SBA Express), though timelines vary by lender and loan complexity. Investopedia
Step-by-step: How to get a small business loan
1. Clarify why you need the loan and how much
Be specific. Lenders want to see a clear use for funds: working capital, equipment purchase, inventory, acquisition, or commercial real estate. Create a realistic loan amount based on estimates (don’t overshoot).
2. Check your business & personal credit
Most lenders — especially banks and SBA lenders — focus heavily on personal credit for small business owners, particularly for new businesses. A personal FICO score in the high 600s–700s makes approvals easier; business credit matters more once your company has established a track record. Improve your score by paying down revolving debt, fixing errors on reports, and ensuring timely payments.
3. Create or polish your business plan & financial projections
A concise business plan with 3–5 year financial projections, cash-flow statements, and a clear repayment plan increases credibility. Lenders want to see that your business can service the debt.
4. Gather required documents (have them ready)
Lenders ask for specific paperwork — the more complete your package, the faster the review. Typical documents include (see checklist below): government IDs, business license, formation documents, bank statements, tax returns, profit & loss, balance sheet, and a business plan. Banks and lenders publish their own checklists — preparing these in advance saves time. Chase+1
5. Choose the right lender
Match the loan type to the lender:
- SBA loans: Best for lower rates and longer terms (but slower processing).
- Community banks / credit unions: Good for relationships and local insight.
- Online lenders: Fast funding, easier qualification, but higher cost.
- Microlenders / nonprofit intermediaries: Ideal for microloans (up to $50k) and borrowers needing technical assistance.
Use lender marketplaces (e.g., SBA Lender Match, online marketplaces) to compare.
6. Apply and be responsive
Submit a complete application and promptly reply to follow-up questions. For SBA loans, expect more documentation and potentially requests for personal guarantees or collateral.
7. If denied, ask why and reapply
If you’re denied, request an explanation, correct any errors (credit reporting mistakes are surprisingly common), improve weaknesses, and consider alternate lender types or smaller loan amounts.
Loan application checklist — everything you should prepare
Below is a practical checklist to assemble before applying. Having this ready dramatically reduces processing time.
Personal documentation
- Government ID (driver’s license, passport)
- Social Security number / EIN
- Personal tax returns (last 2–3 years)
- Personal financial statement (assets & liabilities)
- Personal credit report authorization
Business documentation
- Business formation documents (Articles of Organization/Incorporation)
- Business license & registrations
- Employer Identification Number (EIN)
- Operating agreement or bylaws (if applicable)
- Business tax returns (2–3 years if available)
- Recent profit & loss and balance sheet (YTD; last 12 months)
- Bank statements (typically 3–12 months)
- Accounts receivable / payable aging reports (if relevant)
- Business plan and financial projections
Collateral & legal
- Deeds/leases for real estate
- Equipment lists (for equipment loans)
- Franchise agreements (if applicable)
- Contracts or purchase orders (for invoice financing)
Major banks and lenders publish similar checklists — preparing these before you apply saves time and improves your chances. TD Canada Trust+1
Table — Common loan options at a glance
| Loan Type | Typical Amount | Typical APR / Cost | Best for | Processing Speed |
|---|---|---|---|---|
| SBA 7(a) | $5k – $5.5M | Lower than most non-SBA loans* | Working capital, acquisitions, real estate | 30–90 days (varies) SBA+1 |
| SBA 504 | $125k – $5M+ | Competitive for real estate/equipment | Owner-occupied real estate, heavy equipment | 60–120 days |
| SBA Microloan | Up to $50k (avg $13k) | Competitive; varies by intermediary SBA | Startups, very small needs | 2–6 weeks |
| Bank term loan | $10k – multi-millions | Competitive if credit is strong | Established firms with collateral | 2–8 weeks |
| Line of credit | Up to $250k+ | Variable; interest on draw | Cash flow gaps, seasonal needs | 1–3 weeks |
| Online lenders | $5k – $500k | Higher APRs | Fast funding, weaker credit | 1–7 days |
| Merchant cash advance | $5k – $500k | Very expensive (factor rates) | Urgent short-term cash | 24–72 hours |
*SBA loans have guarantee fees and lender margins; shop lenders for best terms.
What lenders look for — the five core approval factors
- Cash flow & debt coverage — Can your business pay back the loan? Lenders review historical cash flow and projections.
- Creditworthiness — Personal & business credit scores and histories.
- Collateral & guarantees — Real estate, equipment, or personal guarantees can secure the loan.
- Business history & stability — New startups find it harder to qualify for conventional loans; microloans and online lenders can be better for brand-new businesses.
- Purpose & plan — Lenders want to know how funds will be used and how that use leads to repayment.
A Federal Reserve Bank analysis and the Small Business Credit Survey regularly show that cash flow and documented financials are the most frequent reasons for denial — so accurate statements and a realistic plan matter. fedsmallbusiness.org+1
How to increase your approval odds — practical tactics
- Organize spotless documentation. Clean, consistent bookkeeping and up-to-date tax filings are huge boosts.
- Strengthen your personal credit. Pay down revolving balances, correct credit-report errors, and avoid new large debts before applying.
- Build business credit history. Vendor accounts and small lines of credit reported to business credit bureaus help over time.
- Start with a microloan or smaller bank loan. Prove repayment ability then graduate to larger loans.
- Offer reasonable collateral. If you can safely pledge business assets, you may secure better terms.
- Find a local lender or community bank. Relationship lenders often offer flexibility and advice.
- Work with an SBA-approved lender or CDC for SBA loans. They know the program and steps to approval.
- Use a loan readiness checklist or loan broker — professional advice can speed application and avoid errors.
Alternatives when a traditional loan isn’t right
If you don’t qualify for bank/SBA lending or you need funds faster than SBA timelines allow, consider:
- Online term loans and lines of credit — quicker but costlier.
- Invoice financing / factoring — unlock cash from unpaid invoices.
- Merchant cash advance — fast but expensive; use sparingly.
- Equipment financing — lender uses the equipment as collateral.
- Crowdfunding or community lending — reward-based, donation, or peer-to-peer lending.
- Angel investors or venture capital — appropriate for high-growth startups, but dilutes ownership.
- Grants & local programs — check state economic development agencies and nonprofit programs (often sector-specific).
The U.S. Treasury and Federal Reserve reports note the importance of alternative channels for small-dollar borrowers and underrepresented entrepreneurs — but also emphasize the need for transparency in terms and costs. U.S. Department of the Treasury+1
Typical timeline: what to expect from application to funding
- Preparation phase: 1–4 weeks (document gathering, projections)
- Application submission: Day 0 (online or to lender)
- Underwriting / review: 7 days (online lenders) → 30–90 days (SBA 7(a)/banks)
- Approval & closing: 1–3 weeks after underwriting (depends on collateral and legal work)
- Funding: Once closing documents signed; electronic transfer or check.
SBA loans typically take longer because of government guarantees and extra paperwork — plan accordingly (30–90 days is common, though Express products are faster). Investopedia
Common mistakes to avoid
- Applying before documents are ready (creates delays).
- Over-borrowing or using funds for vague “growth” without a clear plan.
- Ignoring business and personal credit health.
- Failing to shop multiple lenders — terms vary.
- Not reading the fine print on fees, prepayment penalties, or covenants.
- Relying solely on high-cost short-term options for long-term needs.
Real-world research & policy context
Federal Reserve surveys and Treasury research repeatedly show gaps in lending access for smaller-dollar loans and underrepresented entrepreneurs. For example, the Federal Reserve’s Small Business Credit Survey and Treasury landscape analyses recommend targeted policies and improved transparency to expand credit access and reduce disparities. These studies also emphasize that improving lender outreach, simplifying application processes, and bolstering technical assistance (especially for microloans and small-dollar lenders) can materially increase approval rates for small businesses. fedsmallbusiness.org+1
FAQs — quick answers entrepreneurs ask most
Q: What credit score do I need for a small business loan?
A: Requirements vary. Banks and SBA lenders typically prefer a personal FICO >680–700, but online lenders may accept lower scores. Business credit scores matter more for long-established companies. NerdWallet
Q: How long does it take to get an SBA loan?
A: Typically 30–90 days from application to funding for SBA 7(a)/504 loans; Express loans are faster. Plan ahead. Investopedia
Q: What is an SBA microloan?
A: A loan up to $50,000 (average roughly $13,000) administered by nonprofit intermediaries — designed for startups and small-dollar needs. SBA
Q: Can startups get bank loans?
A: Startups without revenue face challenges qualifying for traditional bank loans; microloans, community lenders, and online lenders are often better options for new ventures.
Q: Should I use personal assets as collateral?
A: Pledging assets can help approval, but it carries personal risk. Carefully weigh the terms and consult a financial advisor or attorney if necessary.
Q: Are there special programs for minority- or women-owned businesses?
A: Yes—SBA initiatives, local CDFIs, and targeted grant programs support minority, women, and veteran entrepreneurs. The SBA increased outreach and lending to underserved groups in recent fiscal years. AP News
Q: What fees should I expect?
A: Origination fees, guarantee fees (SBA), closing costs, and interest. SBA loans have guaranty fees that vary by loan amount and program; always request a cost breakdown.
