X Steps to Finding the Right Small Business Loan

In any business, it’s not always easy to predict finances. So, when you find yourself in need of a little extra cash, don’t beat yourself up about it. 

Instead, recognize that it’s a typical part of being self-employed and focus on finding a solution. Read more on how to register as self employed here.

Your business has unique needs that a traditional “one-size-fits-most” loan doesn’t cover. Maybe you don’t want to take on a long-term monthly payment to fix your problem. Or your credit isn’t quite where it needs to be to get bank approval.

Finding the right small business loan is essential if you want to use the funds as a springboard to success. But the answer could be in alternative financing you don’t know too much about. If you head straight to the bank, you might miss out on something better. 

How can you get the working capital to fund your business fast? Follow these steps to get to a personalized solution.

1. Review Your Financial Situation

First things first: Where do you stand with your business’s finances? Would a lender consider you a good risk or a high risk?

To find out, pull out all the information a bank loan asks for. Not all lenders will need this much paperwork, but it gives you a thorough look at the big financial picture. Once you get through this process, nothing a potential lender says should be a surprise.

Parts of the Whole Picture

At a minimum, you’ll need to know:

  • Your federal tax ID number and how much, if anything, you owe the government
  • The start date of your business
  • Your personal and business credit score
  • Bank statements and tax returns for the last three years (personal and business)
  • The gross revenues for the past three years
  • Your outstanding debt
  • A list of monthly expenses
  • Your accounts receivable report

Business owners that haven’t been open for three years should use what they do have.

With that information, you’ll know how much you owe creditors and when it should be paid off. You’ll see your profit and loss numbers and know if you’re steadily improving or need to make a change.

Your accounts receivable report tells you how much you can expect to receive in the near future and how much money is overdue.

Knowing your credit score gives you a better idea of the type of risk lenders will see you as and whether you can expect a competitive rate.

And with all your expenses listed out, you’ll be able to move on to the next step.

2. Figure Out Your Cash Flow Needs

It’s obvious that you need some extra working capital right now. But is the financial solution you need a short-term or long-term fix?

If you’re in over your head with debt to multiple lenders, one option is to consolidate it into one big loan. 

In that case, it makes sense to expect to have monthly payments until the expense is paid. But at least you wouldn’t have multiple bills, interest rates, and finances charges.

On the other hand, if your overhead and expenses are typically manageable, a little help is all you need to get you past this challenge. 

With a clear picture of your cash flow situation, you can start step three.

3. Analyze the Options

As a small business owner, you have a variety of financial solutions available. You might not even know about them all.

Common funding sources include:

  • Traditional bank loans
  • Short-term loans from online lenders
  • Invoice financing and factoring
  • Business lines of credit
  • Small business loans through the SBA

The key to determining which one is the best option for your business is to look at the qualifications and the terms. 

A working capital loan comes in many shapes and sizes. This article by Now breaks down each option in detail.

Narrow down each choice based on whether you meet the qualifications first. Then, check out each lender’s rates, fees, and repayment terms before you apply.


A small business loan can create the solid foundation you need to grow your business or get through a slow period. If the solution ends up becoming a problem, though, it wasn’t worth the hassle.

Use these steps to find the working capital source for you that will solve your problems, not create more. 


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