How to Get a Small Business Loan without Losing Your Mind

Linda Jenkins, June 30 2015

learn how to get a loanDoes your business need money? Whether you need startup capital or working capital, take a few minutes to learn about your options for getting a loan or other type of financing. Doing a bit of research upfront will save you time, stress and preserve your sanity during this often complex process.

Although lenders will scrutinize new small business owners because they lack a financial history, proper preparation and knowing what resources to tap into will greatly improve your chances of getting funded. Startup owners should know first and foremost that approaching a large, nationwide bank is not usually the way to go. Although there are exceptions to this rule, in general, large banking institutions are not in the business of funding small businesses, especially startups. Instead, concentrate your efforts on small community banks, credit unions, reputable online resources, and your own personal network for your small business financing needs. 


Important Tips


  • Loans are not the only way to go. Make sure you are aware of your options. Get our ebook, Creative Financing, to learn more about alternative financing including peer to peer lending, equity crowdfunding and rewards-based crowdfunding.
  • Be sure to consult both an Attorney and Certified Public Accountant before signing any financial agreements.


Online Lending Networks

Get a business loan quote online. This can be a fast and hassle-free way to find funding. One of the quickest ways to get working capital is through Kabbage: 

  Get funded with Kabbage

Get up to $100K in 7 minutes with Kabbage. Sign up now.

Here are a few other reputable online lending networks you may want to research: LendingClub, OnDeck, DealStruck and LendingTree.


Once you have pursued quotes from online lenders, get prepared to approach offline lenders, assuming you have not already reached your goal. Complete your company's pro forma. Gather the documents you will need to convince lenders that you are a good risk...

Contrary to popular belief, the Small Business Administration does not usually lend directly (except in the case of disaster assistance). Small business owners must first attempt to secure private financing before seeking a SBA-backed loan from a qualified lending institution.

You will need to gather this information to fulfill small business loan requirements for most offline lenders:

A business plan. The business plan is an essential document that gives owners and prospective lenders an understanding of the company's customers, strengths, weaknesses, competition and growth potential. It also highlights your qualifications and expertise as the business owner, and serves as a powerful proposal for financing.

Cash flow projections. Will you be able to repay a loan? Realistic cash flow projections allow the lender to assess business risk. Cash inflows and outflows can be categorized into three main parts:

Operating (sales and business expenditures)
Investing (asset sales and purchases)
Financing (loan payments and proceeds, owner investments & withdrawals)

CAUTION: Lenders will want to see that the majority of your cash inflow comes from operating activities.

A personal financial statement. This is a list of your personal assets and debts. Banks will also typically check the owners' credit report & rating, so be sure to review yours before initiating the business loan process. Another sure way to kill your shot at financing is to have a record of unresolved tax issues. If you are affected by garnishments or liens, be sure to contact a reputable tax attorney prior to approaching any lender.

Business Financial Statements & Tax Returns. In the event that your business has been in operation for more than one year (often a lender requirement), you will need these items to document your financial history.

The use of pro forma spreadsheets can help you organize all of this financial information.

If you intend to present your case directly to a banker or other lender/investor, you need to prepare a convincing small business loan presentation. Start by putting yourself in the lender's shoes. He or She is most interested in the answers to these three questions:

What will you do with the loan?

Are you a risk worth taking?

How committed are you to your own business idea?


Your answer to these three questions will largely determine whether or not you receive funding.

What will you do with the loan? To properly answer this, you will need to be keenly aware of all the details of your specific business plan. You must be able to back up your financial projections with realistic answers. Even if your business is a startup, or you are forging a new industry, you must be able to explain how your research brought you to the conclusions in your business plan, and be ready to explain exactly how the funds you are requesting will be used.

Are you a risk worth taking? The format of your business plan and the results of your credit report may answer this question for you. Your history of taking out and repaying loans (whether business or personal) is crucial here. In any case, you must show some forethought to the level of credit risk you present, and be able to address the lender's concerns. You may find that as long as you have substantial equity in real estate, good cash flow, and a good credit rating, you are a sure bet for bankers. However, if you fall short in any of these areas, you will have to justify the risk. Bankers are also sensitive to the format, flow and content of your business plan, so using reputable business plan software is highly recommended.

How committed are you to your own idea? You must be willing to invest some amount of your own money into the business. This may seem obvious, yet many small business owners expect banks to supply 100% of startup costs. If you intend to invest $0, your loan amount will be $0. You must have some skin in the game to get funding!

For more information on preparing a plan see What to Include in a Business Plan.

If you approach the right lenders, have your documents in order, and are prepared to intelligently address the lender's concerns about loaning you money, you will have a very good chance of getting a small business loan or other financing.