How to get a business loan: A step-by-step guide

Securing a business loan can be one of the most important financial decisions you’ll make as an entrepreneur. Financing is a common part of running a business. In a recent Small Business Insights survey, 75% of US small businesses report using at least one form of financing in the past three months, but it isn’t always simple. In the same survey, 23% said it’s getting harder to access financing.

But when you understand what lenders look for and how the process works, you can move faster and make smarter choices. This guide walks you through how to get a business loan step by step, from preparation to funding.

Assess your business needs and loan options

Before approaching any lender, clearly define why you need financing and how much you require. This foundation shapes every decision that follows.

Determine your funding purpose

Start by getting specific about what the money is for. Lenders want to see a clear use of funds and how that use supports your business.

Common small business loan uses include:

• Working capital for day-to-day operations
• Equipment purchases for machinery or technology
• Inventory to stock your business
• Real estate for purchasing or renovating property
• Business expansion, including new locations or product lines
• Debt consolidation to streamline existing obligations

Calculate how much you need

Once you know the purpose, build a simple budget so you’re borrowing the right amount. Borrow too little and you may not finish what you started. Borrow too much and you’re paying interest on money you didn’t need.

Create a detailed budget that accounts for:

• The total cost of your project or need
• Additional expenses like fees, insurance, or installation
• A cushion for unexpected costs (typically 10-20% extra)
• Your ability to repay based on projected cash flow

Understand your loan options

Different loan types are designed for different goals. When you match the loan to your need, you’re more likely to get terms that fit your business and avoid paying more than you have to.

Step 2: Check your creditworthiness

Before you apply, review your credit carefully. Lenders use both your personal and business credit profiles to gauge risk, and knowing where you stand helps you focus on the lenders and loan types you’re most likely to qualify for.

Review your personal credit score

Many lenders review the personal credit history of the business owner or guarantor, particularly for newer businesses without a long financial history. Your personal score helps lenders assess your overall financial responsibility and creditworthiness as part of the business loan evaluation.

You can get your credit reports from Experian, Equifax, and TransUnion. Dispute any errors and address negative items before applying.

Check your business credit score

If your business is established, lenders will also look at your business credit score. Scores are tracked by bureaus like Dun & Bradstreet, Experian Business, and Equifax Business. You can build and maintain a strong business credit profile if you:

• Establish business credit by opening accounts with vendors who report to credit bureaus
• Pay all business obligations on time
• Keep business credit utilization below 30%
• Maintain accurate business information across all bureaus

Calculate your debt-to-income ratio

Lenders also want to see that your income can support a new payment. One common way they check this is by looking at your debt-to-income (DTI) ratio.

To calculate DTI, divide your total monthly debt payments by your gross monthly income. In general, a lower ratio can make you look less risky because it shows you have more room in your budget for a new loan payment.

Tip: If your DTI feels high, paying down a balance or increasing revenue before you apply can help strengthen your application.

Step 3: Gather required documentation

Getting your documents together upfront can make the rest of the process smoother. It also shows lenders you’re organized, prepared, and on top of your numbers—which can go a long way during underwriting.

Below are the most common documents lenders ask for. The exact list varies by lender and loan type, but this will cover the basics.

Personal documents

Even when you’re applying for a business loan, lenders may still review your personal financial picture, especially if you’re a newer business or you’re personally guaranteeing the loan.

Be ready to provide:

• Government-issued ID (driver's license or passport)
• Personal tax returns from the past two to three years
• Personal financial statement showing assets and liabilities
• Resume or CV highlighting relevant business experience
• Proof of address (like a utility bill or lease agreement)

Business documents

These help lenders confirm your business is legitimate, financially stable, and able to repay the loan.

Common requests include:

• Business tax returns for the past two to three years (if established)
• Business licenses and registrations
• Articles of incorporation or business formation documents
• Business bank statements from the past three to six months
• Profit and loss statements (monthly or quarterly)
• Balance sheet showing current financial position
• Cash flow statements demonstrating liquidity
• Accounts receivable and payable aging reports

Additional documentation

Some lenders will ask for a few extra items depending on what you’re borrowing for and how much.

You may also need:

• Business plan outlining your strategy and projections
• Collateral documentation (property deeds, equipment titles, inventory lists)
• Commercial lease agreement if you rent business space
• Franchise agreement for franchise businesses
• Contracts or purchase orders showing future revenue
• Insurance policies for business, liability, or key person coverage

Step 4: Prepare a solid business plan

A comprehensive business plan demonstrates your vision and convinces lenders you can repay the loan. A strong business plan does two things at once: it shows lenders you know where your business is headed, and it makes it easier for them to trust that you can repay what you borrow. You don’t need a 40-page document. Just a clear, realistic plan that’s backed by numbers.

Executive summary

The executive summary is your elevator pitch on paper. Write a concise overview (one to two pages) that covers:

• Your business concept and value proposition.
• Target market and competitive advantage.
• Financial highlights and specific funding request.
• Your repayment strategy.

Company description

This section gives lenders a quick, confident snapshot of your business and how it operates.

Be sure to detail your business structure, location, and what makes you unique in the marketplace. Also, explain what you do, who you serve, and how your operations are set up.

Market analysis

Lenders want to see that there’s real demand for what you do and that you understand the industry you’re competing in.

This section should include:

• Your target audience (key traits, needs, and buying behavior)
• The market opportunity (size, trends, and where you fit)
• A quick competitive overview and your positioning
• A summary of how you plan to market and sell

Financial projections

This is where your plan turns into proof. Your projections don’t have to be perfect, but they should be realistic and easy to follow.

Provide realistic forecasts for three and five years and include:

• Revenue projections with supporting assumptions
• Expense budgets, including the loan payment
• Cash flow forecasts showing you'll have funds to repay
• A break-even analysis (when revenue covers costs)
• Use of funds statement explaining exactly how you'll spend the loan

Step 5: Research and select potential lenders

Different lenders specialize in different loan types and business profiles, so it’s worth taking a little time to find the best match for your needs.

Traditional banks

Traditional banks are often a strong fit for established businesses with solid credit, steady revenue, and assets that can support the loan. They may offer competitive rates and longer repayment terms, but they typically have stricter qualification requirements and a more detailed application process.

If you’re looking for a long-term banking relationship, a traditional bank can be a great option. Just keep in mind it may take longer to move from application to funding.

Online lenders

Online lenders use technology-driven platforms to offer speed and convenience. They offer fast approval and funding (sometimes within 24 hours) and often have less stringent credit requirements. The trade-off is that they may charge higher interest rates and have shorter repayment terms, so it’s important to read the fine print and compare total repayment.

Credit unions

Credit unions can be a great choice if you prefer a more personal, relationship-based experience. Because they’re member-owned, credit unions often focus on community lending and customer service, and they may offer competitive rates.

Requirements and flexibility vary by institution, and some may require membership, but the process can feel more approachable for many business owners.

SBA lenders

These are banks and credit unions approved to offer Small Business Administration loans, or SBA 7(a) loans. They provide government-backed loans with favorable terms and often offer higher loan amounts with lower down payments. However, they require extensive documentation and have longer approval processes, typically taking 45-90 days.

Alternative lenders

Alternative lenders are a broad category that includes specialty finance companies and niche funding options. These lenders can be helpful if your situation doesn’t fit a traditional bank’s requirements or if you need something more tailored to your business model.

Terms and pricing can vary widely, so the key is to compare offers carefully and make sure the repayment structure fits your cash flow, especially if payments are more frequent or tied to revenue.

Step 6: Submit your loan application

Once your documents are ready and you’ve narrowed down your lender options, it’s time to apply. This is where your preparation pays off.

Complete the application accurately

Slow down and fill everything out carefully. Small mistakes can create avoidable delays, and inconsistencies can raise questions during underwriting.

Make sure every section is complete and honest, double-check for typos or mismatched details, and confirm your financial numbers line up with the documents you’re submitting. Also, don’t forget to sign and date anything that requires it.

Submit supporting documents

Treat your paperwork like a clean, easy-to-review package. A simple checklist can help you confirm nothing’s missing, and clear file names make it easier for the lender to move quickly.

Follow the lender’s preferred format (often PDFs or paper copies), and keep duplicates of everything you send so you have a complete record on your side, too.

Be responsive

After you submit, stay engaged. Most applications involve follow-up questions, extra forms, or a request to clarify something in your financials.

If you respond quickly and keep communication open with your loan officer, you’ll help keep the process moving. And if anything feels unclear, ask. Getting aligned early is always better than guessing.

Step 7: Navigate the underwriting process

Once submitted, your application enters underwriting. This is where lenders verify your information and assess the risk of lending to you.

What underwriters review

Many lenders evaluate your application using the “Five Cs” of credit. They’re looking at:

• Character: How you’ve managed debt and made payments over time
• Capacity: Whether your business brings in enough income to handle new payments
• Capital: How much of your own money you’ve invested in the business
• Collateral: Assets that could help secure the loan (if required)
• Conditions: Industry and economic factors that could affect your business

Common underwriting outcomes

Once the review is complete, you’ll usually receive one of these decisions:

• Approved as submitted: You receive the full amount and terms requested
• Approved with conditions: You’re approved, but you’ll need to meet certain requirements before funding (like submitting an extra document or paying down an old balance)
• Counteroffer: The lender is willing to approve you, but with different terms (such as a different amount, rate, or repayment period)
• Denied: The application doesn’t meet the lender’s criteria

If additional information is requested

It’s very common for underwriters to ask for clarification, especially if something in your statements looks unusual or needs more context.

If that happens, respond quickly, explain anything out of the ordinary in a straightforward way, and provide extra documentation when it strengthens your case. And try to stay patient. Verification steps can take time, even when everything is going well.

Step 8: Review and accept loan terms

Before accepting any loan, carefully review all terms and conditions.

Key terms to understand

Make sure these basics are crystal clear before you accept an offer:

• Principal: The amount you’re borrowing (the loan amount).
• Interest rate/Annual Percentage Rate (APR): APR represents the annualized cost of borrowing, including interest and certain fees, making it easier to compare loan offers."
• Repayment term: How long you have to repay the loan.
• Payment schedule: How often you pay (weekly, biweekly, monthly) and how much.
• Prepayment penalty: A fee for paying the loan off early (not every loan has one).
• Late payment fees: Charges if a payment is missed or comes in late.
• Collateral: Assets you’re pledging to secure the loan, if required.
• Personal guarantee: An agreement that you’re personally responsible if the business can’t repay.

Calculate total cost of borrowing

Here’s a simple way to estimate what you’ll pay over the life of the loan:

1. Multiply your payment amount by the total number of payments

2. Add any upfront fees (origination, application, processing, closing, etc.)

3. Add any ongoing fees (annual fees, maintenance fees, service charges)

4. Subtract the principal to estimate the total interest and fees you’ll pay

Compare multiple offers

If you have more than one approval, take a little time to compare them side by side before you choose. A simple spreadsheet can help you line everything up so you’re not relying on gut feel.

Look beyond the interest rate and focus on the total cost, especially APR, fees, and what you’ll repay over the life of the loan. You’ll also want to weigh flexibility, like whether there are prepayment penalties or options that let you pay the balance down early without added cost.

Finally, consider the lender’s responsiveness and service, especially if you’ll need support after funding.

Step 9: Close the loan and receive funds

Once you’ve accepted an offer, you’re in the home stretch. Closing is when you sign the final paperwork and the lender releases the funds. It’s mostly straightforward, but it’s still worth slowing down and reading everything so you know exactly what you’re agreeing to.

Review closing documents

You’ll typically receive a small packet of legal documents that spell out your responsibilities and the lender’s rights.

Common documents include:

• Promissory note: Your formal promise to repay the loan.
• Loan agreement: The full terms and conditions, including fees, repayment details, and what happens in a default.
• Security agreement: Details on collateral, if the loan is secured.
• Personal guarantee: Your personal commitment to repay if the business can’t.
• UCC filing: A public notice that the lender has a security interest in certain business assets (when applicable).

Sign and return documents

Treat this step like a final double-check. Read everything closely, ask questions if anything feels unclear, and consider having an attorney review complex agreements, especially if collateral, a personal guarantee, or restrictive covenants are involved.

Once you sign, keep copies of every document for your records so you can reference terms later without guessing.

Receive your funds

After the lender has everything signed (and any final conditions are satisfied), funds are released. The delivery method depends on the lender and the loan type, but it’s commonly:

• ACH/direct deposit to your business bank account
• Wire transfer for faster delivery (sometimes with a fee)
• Check by mail or pickup
• Draw schedule for construction or phased projects, where funds are released in stages

Funding timelines vary a lot, so it helps to ask your lender what to expect. Some lenders can fund quickly, while others (especially loans with more documentation) may take longer from application to cash in hand.

Step 10: Manage your loan responsibly

Receiving funds is just the beginning. Proper loan management protects your credit and business health.

Here’s what you should do:

Set up automatic payments

One of the simplest ways to stay on track is to set up automatic payments. Auto-pay helps you avoid missed due dates, late fees, and unnecessary hits to your credit. It also cuts down on admin work, so you’re not spending time each month double-checking whether a payment went through.

Track your use of funds

Be disciplined about how you use the money and document how you spend loan proceeds:

• Match expenditures to your stated purpose in the loan application.
• Keep receipts and invoices for tax and accounting purposes.
• Update your accounting records immediately.
• Prepare for potential lender audits by keeping clear records.

Monitor your business performance

Keep a close eye on your financial health. Regularly review cash flow to ensure you have repayment capacity. Also, check financial statements to track progress and compare your budget versus actual spending.

Communicate with your lender

A good lender relationship is worth protecting. If something changes in your business (e.g., a major expense, a shift in revenue, or a new opportunity that affects your plan), keep your lender in the loop.

And if you ever think you might have trouble making a payment, reach out early. Lenders are usually more willing to work with you when you’re proactive and transparent. Over time, that relationship can also open doors to better terms, additional funding, or refinancing as your business grows.

Final thoughts

Getting a business loan can feel like a lot. But when you take it step by step, it gets much more manageable. If you’re clear on what you need, bring organized financials, and choose lenders that fit your business, you’ll put yourself in a strong position to move forward with confidence.

If you want a simple place to start, you can explore financing options through QuickBooks Capital and apply right in QuickBooks, whether you’re looking for a QuickBooks Term Loan for a bigger investment or a QuickBooks Line of Credit for flexible cash flow support.

QuickBooks Term Loan and QuickBooks Line of Credit loans are issued by WebBank.