What do you think of when you hear the word business? You probably think of some business giants you interact with regularly, such as Apple, Tesla, Alibaba, and several others. They are the ones that get all the limelight. But what if small businesses hold the economic future more than big businesses? What if they are keeping the economy running?

There’s quite a bit that you should know about small businesses, and the loans that are available to them at different stages of their growth lifecycle. From their importance to their challenges, this article encompasses it all.

What Is a Small Business?

A small business refers to a privately owned and operated business that involves less workforce. The whole idea mainly depends on the number of employees. This number could be anywhere from 1 to 1,500 employees, depending on the industry. Although this number seems small compared to large businesses, don’t let it fool you into thinking that small businesses are less critical.

Why Are Small Businesses Important?

Small businesses are far more critical than you think. It turns out that small businesses make up over 99% of all US employer firms. America is home to more than 30 million small businesses that employ over an astonishing 58 million workers.

When you add the owners and employees together, that’s the community of roughly 85 million Americans. Businesses with less than 20 workers make up about 89% of total employees. So, it’s no surprise that small businesses account for over 55% of sales in the USA.

Small Businesses and Jobs

Small businesses are the most important job creators all over the world. In the USA, small businesses have provided more than 55% of all jobs and 66% of all net new jobs since 1970. Between 1993 to 2013, they created two-thirds of the net new jobs, a total of 11.8 million new career opportunities.

This is because they are constantly growing and looking to dip their toes in new markets. Of course, that could only happen with the help of employees.

On the other hand, large businesses generally stay the same size and hardly expand. They only hire new employees to replace retirees. When they expand, they provide thousands of jobs to local communities. However, the elephant in the room is that they are more vulnerable to changing market conditions and economic cycles, leading to widespread job loss.

Problems for Small Businesses

Unfortunately, despite their massive impact on the economy, small businesses struggle greatly. High taxes, poor money management, and less marketing disproportionately hurt small businesses and prevent them from growing and offering new jobs. While big companies with big investments and profits cope easily, small businesses often get at their wits’ end.

Small Business Loans

At their core, a small business loan is a certain amount of money borrowed by a person who wants to start or operate a small business. Since small businesses have less capital investments and machinery, taking loans seems a viable solution. A loan can help you get started by providing investment to build a company, buy inventory, or advertise your services. You can take out a loan from a bank which is a lengthy process or you can look into the top small business loan lenders.

Qualification

Of course, you’ll only obtain a loan if you qualify for it. So, it’s a good idea to ask the lender directly about the business loans qualifications. This will eliminate all the questions in your mind before applying for it.

Once you understand how business financing works, see whether you qualify for the business loans or not. It’s essential to see this before applying, so your credit history does not show various credit checks, affecting your credit score big time.

First, make sure your personal credit history is in order. Plenty of online services are available to help you check your credit history. You can find out your credit score by requesting a copy of your credit report.

Furthermore, make sure that your bill and loan payment histories are consistent and on time over the past three years or so. This is because small business loan lenders usually base the approval on your credit history, especially if you do not offer collateral.

How to Get a Small Business Loan

There are several important steps that you need to take to get a small business loan.

Determine What Kind of Loan You Want

Business loans are of several types. Decide whether you want to go for collateral or not. If you’re looking to get the maximum amount of money, secured loans can help you with that. Furthermore, it can also decrease the interest rate.

Evaluate How Much Can You Repay

Take a closer look at your business plan and see how much you can afford to repay each month. Some lenders may ask you to repay them weekly, so it’s better to ask them beforehand. Ensure that your net income is at least 1.5 times your expenditures (including repayments).

Research

Carry out some research to find more lenders. It’s recommended to contact at least five lenders so you can compare their offerings and then select the best one.

Collect Relevant Documents and Apply

Gather all the required documents to apply for the business loan. They may ask you for your tax returns, your bank statements, legal documents (a copy of your ID card), your business plan, and a few other documents. That’s pretty much it! Good luck with your loan application!

Final Thoughts

Small businesses are the lifeblood of any economy. They create a significant proportion of the jobs and thus, drive the economy. Small business owners who take loans have an ace up their sleeves.

To take a small business loan, go through the qualifications and see if you qualify or not. Then spare a thought to determine which loan option suits you and how you plan to repay it. Once you have a gameplan in mind, you can opt for a loan.