How to Get a First-Time Small Business Loan

Getting a first-time small-business loan can make a big difference for your company’s growth and success. But before you apply for your first small-business loan, make sure you understand your options, and make a plan for how to navigate the application process.

You might already be familiar with personal loans, such as car loans, home loans, or student loans. Small-business loans work a bit differently and can often be more complicated to apply for than personal loans. If you’re wondering how to get a business loan for the first time, it’s important to be prepared, be patient, and be willing to be flexible in how you obtain financing for your business.

Let’s take a closer look at what you need to know when you’re getting ready to apply for a first-time small-business loan.

When applying for a first-time business loan, success is not guaranteed. The process of getting approved for a small-business loan from a bank can be complicated and time-consuming, especially if you’re accustomed to getting approved easily for personal credit cards or other financial products in your personal life. Before you apply, make sure you understand the process of how to get a business loan.

Here are a few of the factors that banks and other lenders look at when they’re deciding whether or not to issue a loan to your business.

If you have just recently started your business, you might have a hard time getting a conventional loan from a bank. Many banks want to see at least 2 years of time in business and previous business tax returns from your company.

Choosing the best lender might depend on how long your company has been in business, how much money you want to borrow, and other factors.

If your business is well-established, with 2 or more years of time in business, and this is the first time you’ve tried to borrow money, then you might want to apply for a business loan or line of credit with a bank or credit union. Start by talking to the bank or credit union where you already have a business bank account and are doing your everyday business banking.

If your company is a new startup and you have less than a year in business, it might be harder to get a business loan from a traditional bank. You might want to consider an online lender that works with new businesses that are just starting to build business credit. Check out our list of best small business loans for startups.

Another option if you are concerned that your business might not qualify for a bank loan: apply for a Small Business Administration (SBA) loan. Many banks and credit unions offer SBA loans to small businesses that might not otherwise be able to access credit. The eligibility requirements for SBA loans are sometimes less strict than a usual bank loan.

If your business is still in the early stages of startup mode, if you do not have 2 years of established business credit history, and if your personal credit history is less than perfect, you might struggle to qualify for a small-business loan from a bank. Fortunately, you still have options:

There are many types of small business loans for business owners with bad credit. Some online lenders offer microloans, crowd-sourced loans, lending marketplaces, and more. These online lenders typically do not require as high of a credit score as a bank. Check out our list of best business loans for bad credit.

If you’ve been rejected for a business loan by a bank, you should consider applying for a SBA loan. Most SBA loans require a 680 credit score, but check the eligibility requirements to be sure. Many banks and credit unions offer SBA loans; ask your banker if SBA loans are available at your financial institution. 

SBA loans are backed by the federal government, and are intended for small businesses that cannot get access to private financing, so their lending requirements are less strict than a usual bank loan. If you’re looking for a first-time business loan and have been denied a conventional bank loan, you might want to apply for a SBA loan instead.

There are many types of SBA loans with different loan amounts, interest rates, and details depending on your business, industry, and how you want to use the loan proceeds. If you apply for a SBA loan, you might be able to get a lower interest rate and a longer-term payoff schedule than a typical bank loan, but be prepared for a longer application process and more paperwork to fill out. 

If you don’t want to wait weeks or months to go through the process of applying for a first-time business loan through a typical bank, credit union, or SBA lender, and if you’re willing to accept a higher interest rate on the money that you borrow, you might want to consider an online lender.

Online lenders, also called alternative lenders, help small businesses get access to loans and lines of credit quickly, sometimes in a matter of minutes. These lenders often are willing to work with business owners with bad credit, with new businesses that don’t have much time in business, and also are flexible about how to assess a business’s creditworthiness. For example, if you don’t have a business credit score, but do have a track record of online sales, you might qualify for a first-time business loan from an online lender.

Check out our list of best online lenders for small business loans.

Applying for a first-time business loan can help take your business growth to the next level. Don’t worry if you don’t have perfect credit or don’t have many years of established history of being in business; even new startups and business owners with bad credit can still potentially qualify for first-time business loans. Be willing to look beyond a typical business loan from a bank, and consider your options for SBA loans or online lenders. 

Would you like to learn more about how to get a first-time small business loan and find the right lender for your needs? Please check out our picks for the best small-business loans.

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