Your First Business Loan

Before applying for any business funding, understand your starting position. This determines which products you'll qualify for and what terms to expect.

Check Your Personal Credit Score Most business lenders will check your personal credit, especially for first-time borrowers. Check your score for free at Credit Karma, Credit Sesame, or AnnualCreditReport.com.

• ●720+: Excellent. Qualify for best rates on most products
• ●680-719: Good. Most options available including SBA
• ●640-679: Fair. Alternative lenders, most products except SBA
• ●580-639: Below average. Limited options, higher rates
• ●Below 580: Challenge credit. Focus on revenue-based products

Assess Your Business Metrics Lenders care about:

• ●Time in business (6 months minimum for most, 2 years for SBA)
• ●Monthly revenue (most want $10K+ monthly)
• ●Cash flow consistency (regular deposits, no overdrafts)
• ●Industry type (some are higher risk than others)

Define Your Need Be specific about:

• ●Exact amount needed (don't overborrow)
• ●Purpose of funds (equipment, inventory, working capital)
• ●Timeline for needing the money
• ●How you'll repay it

Your first business funding experience sets the tone for future borrowing. Choose wisely based on your situation.

Best First Products for New Borrowers:

1. Business Credit Card Why start here: Easiest approval, builds business credit, flexible use Best for: Small, ongoing expenses under $25K What to look for: No annual fee, rewards, reports to business credit bureaus Watch out for: High APRs if carrying balance, personal guarantee required

2. Business Line of Credit Why consider: Only pay for what you use, revolving access Best for: Businesses with 12+ months history, 640+ credit Typical amounts: $10K-$100K to start What to look for: Low draw fees, reasonable rates, no maintenance fees

3. Equipment Financing Why consider: Equipment as collateral = easier approval Best for: Specific equipment purchases Typical terms: 2-7 years, matched to equipment life What to look for: No prepayment penalty, reasonable down payment

4. Small Working Capital Loan Why consider: Fast, accessible, builds payment history Best for: Urgent needs, businesses with steady revenue Typical amounts: $10K-$50K to start What to look for: Clear terms, reasonable factor rate or APR

Products to Avoid as First-Timer:

• ●Multiple MCAs stacked together
• ●Very short-term (under 3 months) high-cost products
• ●Any product where total cost isn't clearly stated

Here's what to expect when applying for your first business loan.

Documentation You'll Need: Standard requirements across most lenders:

• ●Government-issued photo ID
• ●Business bank statements (3-6 months)
• ●Proof of business ownership (LLC docs, EIN letter)
• ●Voided business check

Additional for larger amounts or traditional lenders:

• ●Business tax returns
• ●Personal tax returns
• ●Profit & loss statement
• ●Balance sheet

The Timeline:

• ●Application: 15-30 minutes online
• ●Initial decision: Hours to days depending on product
• ●Document review: 1-3 days
• ●Funding: Same day to 2 weeks depending on product

What Lenders Evaluate:

1. ●Credit score (personal and business if available)
2. ●Time in business
3. ●Monthly revenue and deposits
4. ●Cash flow patterns (looking for consistency)
5. ●Industry risk level
6. ●Existing debt obligations
7. ●Purpose of funds

Soft Pull vs Hard Pull:

• ●Soft pull: No impact on credit, used for pre-qualification
• ●Hard pull: Affects credit score, used for final approval Ask lenders which they use and when.

Avoid these mistakes that trip up first-time borrowers:

Mistake #1: Taking More Than Needed Problem: Higher payments, more interest, harder to manage Solution: Calculate exact need, add 10-15% buffer, no more

Mistake #2: Not Understanding Total Cost Problem: Surprised by total payback amount Solution: Always ask "What is the total amount I will pay back?" Write it down.

Mistake #3: Ignoring Cash Flow Impact Problem: Payments strain daily operations Solution: Calculate payment as % of monthly revenue. Keep under 15% if possible.

Mistake #4: Applying Everywhere at Once Problem: Multiple hard inquiries hurt credit, looks desperate Solution: Research first, apply to 2-3 targeted lenders maximum

Mistake #5: Not Reading the Agreement Problem: Surprised by terms, fees, or restrictions Solution: Read before signing. Ask about anything unclear.

Mistake #6: Mixing Personal and Business Problem: Can't prove business revenue, messy financials Solution: Open dedicated business bank account, run all business through it

Mistake #7: Waiting Until Desperate Problem: Make poor decisions under pressure, worse terms Solution: Secure funding relationship before emergency

Your first funding is a stepping stone. Here's how to improve your position for next time.

During Your First Loan:

• ●Pay on time, every time (early if possible)
• ●Maintain clean bank statements
• ●Continue building business credit
• ●Keep records of successful repayment

After Successful Repayment: Your options expand significantly:

• ●Renewal with same lender (often better terms)
• ●Qualify for new products (lines of credit, SBA)
• ●Larger amounts available
• ●Better interest rates

Building Business Credit Simultaneously: While using your first funding:

1. ●Open business credit cards (pay in full monthly)
2. ●Establish trade lines with suppliers
3. ●Register with Dun & Bradstreet (get DUNS number)
4. ●Monitor your business credit reports

The Upgrade Path: Typical progression over 2-3 years:

1. ●Start: Small working capital or equipment financing
2. ●6-12 months: Business line of credit
3. ●12-24 months: Term loans, better rates
4. ●24+ months: SBA loans, bank relationships