Business Plan and Application Review
With a traditional term loan, business lenders will require that you submit a business plan and a loan application. They will also conduct a thorough financial investigation. Banks only approve good credit standing, unless there’s collateral involved. If you have outstanding debt and are not confident in making it a secured loan, consider bad credit loan lenders.
While loan applications differ from lender to lender, you’ll generally be asked for personal and financial information. This could include:
Loan Documentation and Disbursement
Once your loan is approved and underwriting is complete, your lender will assemble a package of loan documents. This package is your loan agreement.
While different types of loans require different documents, the loan agreement essentially lays out the terms of your loan. Your agreement will include information about various loan costs, how and when the loan is repaid, and any additional terms and conditions.
Once you and the lender sign these documents, the next step is for the lender to release the funds. In what amount and when the lender releases these funds depends on what’s stated in your loan agreement.
Repaying the Small Business Loan
After you’ve received your loan funds, the repayment period will start. The amount and timing of your payments will be documented in your loan agreement.
Usually though, you’ll repay your loan with periodic payments. Each of these periodic payments will include principal and interest. If you have any questions about your repayment terms, be sure to ask your lender prior to taking out the loan.
You may be allowed to make larger payments than you’re required to pay the loan off early. However, some lenders will assess fees for early repayment. You can ask your lender, or review your agreement, to determine if you can pay your loan back early without a fee.
Once you’ve completed repayments, the lender will remove any liens on your collateral. When the liens are removed, the business lender no longer has a claim against you. Then, to mark the end of your loan agreement, the lender will mark your note as paid.
Take Time to Prepare for the Small Business Loan Process
It’s completely normal—perhaps even expected—to feel overwhelmed by the small business loan process. Fortunately, by familiarizing yourself with the process, you can quickly overcome that feeling.
Just remember to be prepared for the different nuances in individual online lenders’ loan approval processes.
Also, keep in mind that the process we’ve outlined above applies to traditional term loans. Other types of financing such as merchant cash advances, equipment financing, or business lines of credit follow slightly different processes.
