SME business loans can provide the vital funds needed for businesses to expand, invest in new technology, or hire more staff. In this guide, learn about the types of SME loans available and how you can qualify for one.
What Are SME Business Loans?
SME business loans are specialized loans specifically designed to meet the needs of small and medium-sized businesses. They provide businesses with working capital to support their operations, pay salaries, purchase new equipment and inventory, invest in technology, and more. SME loans are generally longer term than personal loans which have shorter repayment durations. The terms of an SME loan can vary depending on the specific lender but typically include amounts up to $250,000 with flexible repayment how terms ranging from 3 months to 5 years.
What Types of Loans Are Available?
SME business loans come in many different forms, including short-term loans, equipment financing, merchant cash advances, and unsecured lines of credit. Each type of loan has its own advantages and disadvantages so it’s important to consider the pros and cons before you make your selection. Short-term loans have an expedited approval process and can be used for a variety of purposes including working capital needs, equipment purchases, bridge financing, and more. Equipment financing is ideal for businesses that need specialized equipment such as manufacturing machinery or commercial vehicles. Merchant cash advances provide businesses with a lump sum of cash that is repaid with a percentage of future credit card sales. Unsecured lines of credit are also available which offer flexible financing arrangements that build credit with continual use.
Who Qualifies for Small Business Loans?
The requirements for small business loans vary based on the type of loan and lender. Generally, to qualify a small business must have been operational for at least one year and have an annual revenue of $100,000 or more. Some lenders may require additional documents such as tax returns, bank statements, and personal guarantees from the owner. Additionally, many lenders will look at the personal credit history of the business owner/s when considering a loan request.
What Documentation Is Required to Get a Loan?
To apply for an SME business loan, you will need to provide certain documentation including the business’s financials and tax returns, along with additional personal documents such as driver’s license, passport and/or other forms of valid identification. Additionally, some lenders may require a business plan or other legal documents related to the business. Be sure to ask your lender exactly what documents are needed before submitting your application.
Tips for Getting Approved for a Loan Quickly and Easily
Applying for an SME business loan can be a stressful process, but following these tips can increase your chances of approval. First, be sure to present your lender with the most accurate and up-to-date financial information possible. Having organized and concise financials on hand will speed up the application process significantly. Additionally, it’s important to understand what type of financing is best for you before applying– choose wisely! Finally, make sure you have a clear plan for how the loan money will be used when you get approved. This can help the lender have confidence in your repayment plan and increase your chances of approval.
