How to Apply for a Business Loan Online in 2022

Find out all you need to know to apply online for the right small business financing for you.

There are many more online small business loan options available right now than just a few years ago.

The good news: The technology powering online small business loan providers makes it relatively easy to research loan options to find the right one for you and apply for a loan.

The online loan application process is simpler than the one for traditional banks and lenders. However, it involves more than simply filling out an online form. Reputable online lenders will require small business borrowers to provide enough information through the business loan application process for them to be able to determine the creditworthiness of the small business owner. Even though the online application process is rigorous, the technology powering most online lenders allows them to make approvals fast. You could get an immediate decision or one in a day or two.

Here are the answers to commonly asked questions about identifying the right financing option and online provider for you and successfully completing the loan application process.

• Why is completing small business loan applications online becoming more common and acceptable?
• What kinds of small business loans can I apply for online?
• How do I apply for a small business loan online?
• How do I know if I can trust an online lender?
• Can I apply for an SBA loan online?
• How long will the online application process take?
• What documents do I need to apply for a business loan online?
• Do I need collateral to apply for a small business loan online?
• Do I need collateral to get an equipment loan?
• Can I apply for a business loan with a mediocre personal credit score?
• Do I need a personal guarantee to get a business loan?
• Can I apply for a business loan if my business is not a corporation?
• Can I apply for an online business loan after bankruptcy?
• Do I need a business plan to get a small business loan?
• How do I apply for a startup loan?

Why is completing small business loan applications online becoming more common and acceptable?

Technology is changing all aspects of life, from how we go to the doctor to getting rides. The pandemic accelerated the trend toward doing more business online. This was especially true for small business lenders. When business owners placed unprecedented demand on them for Paycheck Protection Program (PPP) loans, many moved the application process online.

Small business owners liked the PPP online application process so much that it became the preferred choice for many. One of the top reasons small business owners choose online lenders is the relative ease and speed of the application process.

The weeks- or months-long application and approval process that is the standard for most traditional financial institutions — along with the reams of documents required to be submitted with a traditional loan application — makes it easy to see why a simple and straightforward online loan application makes a lot of sense for busy small business owners.

Another benefit of online applications is that they guide small business owners step-by-step through the application process. A small business owner doesn’t have to be a finance expert to complete a loan application.

Because online loan companies view loan approval differently than traditional lenders, they’re making it possible for more small business owners to qualify for loans. Old-school lending businesses depend heavily on your personal credit score and the collateral you’re willing to back the loan with on their approvals. Online lenders leverage artificial intelligence, their back-end technology, unique algorithms, and a broader range of lender information to guide their lending decisions. This often makes it possible for small businesses that wouldn’t qualify for a loan at a traditional bank to secure one with an online lender.

One more plus with online loan companies: Your personal and business information is more secure than a regular small business loan provider. Everything is processed digitally through secure systems rather than on paper, which can be lost, stolen, or shared with the wrong people.

What kinds of small business loans can I apply for online?

Online lenders offer most types of popular small business loan products for working capital and other business needs, including:

Alternative lenders, most of which operate online, offer invoice factoring (loans financing unpaid invoices) and merchant cash advances. You can apply for most business credit cards online.

Take time to figure out which is the best small business loan for you.

How do I apply for a small business loan online?

Do your due diligence and find an online provider that offers the type of loan you need with a favorable interest rate, reasonable fees (including upfront application or origination fees), low or no penalties (such as prepayment penalties), and good repayment terms. Also, check that they’re financially stable and have earned good ratings and reviews from their clients. Review eligibility requirements to ensure you will qualify for a loan. If you have questions, most lenders have a frequently asked questions (FAQs) section on their websites to help you out.

Once you’ve found two or three online loan companies that appeal to you, follow their online application process. The vast majority are pretty straightforward and intuitive. If you have issues, most offer help via chat or over the phone.

How do I know if I can trust an online lender?

Start by checking their Better Business Bureau profiles and looking for their mentions in news organizations like CNBC, Bloomberg, PBS, and others. Also, check them out on third-party review sites like TrustPilot.

Can I apply for an SBA loan online?

The SBA is not a lender but offers small business loans with guarantees. Many online lenders are approved to offer SBA loans, including the popular SBA 7(a) loans. The SBA’s Lender Match tool can help you find a loan company.

How long will the online application process take?

An online business loan application usually takes less than an hour, especially if you have the required documents at the ready. Funding can be completed in as little as one business day. You can expect to be approved immediately or in one day and you can expect next day funding (typically a lump sum) direct into your bank account.

What documents do I need to apply for a business loan online?

Document requirements differ by lender. Online small business lenders typically require fewer documents than traditional ones.

You may need to upload:

• Your business financial statements, including a profit and loss (P&L), income statement, and overview of your expenses
• Personal financial information, including the last three years of personal income tax returns
• Your business license
• Your driver’s license or another form of identification
• A copy of your business lease
• Your business bank statements for the last three months.

Your online lender will explain what documents you need to upload as part of the application process.

Do I need collateral to apply for a small business loan online?

Many lenders, including most traditional lenders like banks and credit unions, require you to identify specific personal or business collateral to apply and qualify for a small business loan. Collateral is something of value, such as a piece of business equipment roughly equal to the loan amount. The lender can seize your collateral if you default on your loan.

Many solid small business owners may not be able to get access to the capital they need because they or their business doesn’t have the collateral required to secure a loan.

Many online small business loan companies do not require a specific type of collateral. However, they may require a general lien on business assets and a personal guarantee to secure a loan. A general lien means your lender could come after your business assets if you stop making loan payments. A personal guarantee means the loan company could come after your personal assets, such as your home or car.

Also, be aware that if you get a loan without collateral, you’ll likely have to pay a higher interest rate than with a collateralized loan. Make sure you can afford the monthly payments before accepting a loan with a high annual percentage rate.

Do I need collateral to get an equipment loan?

The equipment you seek financing for is usually the collateral that backs equipment loans.

Can I apply for a business loan with a mediocre personal credit score?

Most lenders, both traditional and online, will consider your personal credit profile as part of your business’s creditworthiness evaluation. Typically, traditional lenders are likely to weigh your personal score more heavily than online lenders. Good credit will typically get you approved for a loan. If your business is successful, earns a reasonable annual revenue, and you can prove that it has the cash flow to make timely loan payments, you may be able to be approved for a loan with a less-than-ideal personal credit score.

When you apply for a loan, be prepared to explain any unusual circumstances that contributed to your credit issues. It may help you get approved, but your interest rates will be high, and you must make sure you can afford your payments. Credit score requirements are fairly standard. Typically, a minimum credit score of 680 is what it takes to qualify for a bank loan. A score below 650 will likely disqualify you for a Small Business Administration (SBA) loan. If your personal score is below 650, you’ll probably need to apply for loans at online or alternative lenders.

Be aware that if you have a lower credit score and are approved for a loan, you likely have to pay interest at higher rates.

Don’t give up because you can’t get a loan due to bad credit. Take steps to improve your credit score to be more likely to get approved in the future.

Do I need a personal guarantee to get a business loan?

Small business owners are typically required to provide a personal guarantee when applying for a small business loan with traditional banks and online lenders. A personal guarantee means you will be held personally responsible for the loan if your business cannot pay it back. Consider the impact this could have on your personal finances — and your family — if you default on a loan.

Can I apply for a business loan if my business is not a corporation?

You do not need to be incorporated to apply for business financing. However, your organization must be a registered business, have a dedicated business checking account, and a business tax I.D. number. You must also use your loan exclusively for business purposes. If your operation checks all these boxes, you should be able to apply for a loan if you’re a sole proprietor, limited liability company (LLC), or partnership.

Be aware: There may be financial and other benefits to incorporating your business. Consult with your attorney and financial advisor to determine if incorporating could be a smart move.

Can I apply for an online business loan after bankruptcy?

Qualifying for a business loan after filing for bankruptcy will be challenging during the ten years after the bankruptcy shows up on your credit report. However, some online lenders may consider a business for a loan if it’s been at least two years since the bankruptcy was discharged.

Do I need a business plan to get a small business loan?

Traditional lenders, including banks, credit unions, and many lenders affiliated with the Small Business Administration usually require a current business plan as part of the loan application process. Some online lenders may, but most do not.

How do I apply for a startup loan?

It can be challenging for most new startups or new businesses to qualify for loans.

Apart from the SBA, which offers loans backed by guarantees for very-well qualified startups, there aren’t many small business funding options for early-stage new businesses. Most traditional lenders only make loans to companies that have been in business for several years. Certain online lenders will allow startups that have been in operation for at least a year to apply for loans, and they may be approved if the owner has an excellent credit record and the company is solid, earning a dependable monthly revenue. Some non-profit micro-lenders provide business loans to qualifying startups. The maximum loan amounts for these are usually under $10,000.

Now that you know what it takes to apply for a small business loan online, get the financing you need to take your business to the next level.