Starting a business

How to get a small business loan | Types, requirements, rates

Starting a children’s activity business requires a lot of planning as well as a fair amount of capital. Raising money to start a business can be done in a few different ways. 

Depending on your background, the type of programming you want to run, and the students you will teach, you might consider applying for a small business grant. Grants can be difficult to obtain but they are beneficial for new businesses working to get off the ground. If you are already a known member of the community, you can also try to raise money through crowdfunding, fundraisers, events, and more.

Another option for new children’s activity businesses looking to raise money to start up is by applying for small business loans. There are a few different types of small business loans and some are better than others. In this guide, we will outline the types of loans, how to get a small business loan, and the requirements. We will also include information about the best small business loans and rates you can expect.

How to get a small business loan

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Types of small business loans

There are many different types of small business loans, each with its own advantages and disadvantages. A business’ eligibility often depends on the owner’s background and experience, the age of the business, the amount of funding available, and other factors.

  • Private lenders and banks. New businesses looking to apply for a small business loan can shop around online and with private lenders or banks and then choose the one that offers the lowest interest rate. Review our guide on the best banks for small businesses to see which banks are recommended.
  • SBA-backed loans. These are loans that are guaranteed by the Small Business Administration (SBA). They are generally as competitive as non-guaranteed loans, but safer and more stable. They even sometimes come with continued support as well as unique benefits like lower down payments, no collateral needed, and flexible overhead requirements. Unfortunately, new businesses are not typically a fit because SBA-backed loans require at least 2 years in business, strong annual revenue, and good credit.‍
  • Term loans. Businesses can look online or with banks for term loans, which are upfront infusions of cash that then need to be repaid over a predetermined period with interest. They can typically be granted quickly, but might require collateral or guarantees. Plus, interest rates can vary depending on the business’ health and/or the owner’s personal finances.
  • Lines of credit. Small businesses who are looking for more flexibility can apply for a business line of credit. These provide access to funds up to a credit limit. The business only needs to pay interest on the money that has been withdrawn. There are less restrictions on lines of credit, but businesses typically need to be in good standing with strong credit to apply.
  • Government small business loans. The U.S. government has a variety of different loan programs that business owners can consider when applying for a small business loan. The loans are categorized by theme so businesses that fall into the different themes can apply for a government loan.
  • Personal loans. Business owners who want the stability of a bank loan, but are just starting out and do not have any operating history, can take a personal loan and use it for their business. In order to qualify, the business owner must have good credit and a high credit score.

Business loan requirements for a small business loan application

What do business owners need to apply for a small business loan? These business loan requirements are essential to a successful small business loan application.

  • Business plan and proposal. General information about the business like the name, address, and tax ID as well as more specific details like a business plan, budget, and even potentially business goals (especially based around what the business owner will be doing with the money) are necessary for a small business loan application. 
  • Credit scores. Both personal and business credit scores are important to your business loan application. New businesses that do not have a business credit score need to have excellent personal credit scores to be considered. 
  • Finances. Annual revenue (profit and loss statements), tax returns, and bank statements. If this loan is to start a business, and therefore do not have annual revenue and other statements, they will likely ask for the business owner's personal financial information with the application.
  • Personal information. Names, addresses, Social Security numbers, and other important personal information about the business owner(s) is required.
  • Collateral. Some small business loans, especially for new businesses without revenue, require collateral. Collateral can be real estate, equipment, or some other type of capital that the lender or bank can sell to recoup on the loan if the owner cannot repay it.‍
  • Guarantee. A signed personal guarantee, which is an agreement that explains you are responsible for paying back the loan, might also be required, especially for newer businesses. 
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Best small business loans

Ultimately, the best small business loan depends on the small business. Each type of loan and each lender has positives and negatives. The most important advice for business owners is to look at the options and find the right one for their business and goals. 

  • Best SBA-backed loan for small businesses. The SBA 7(a) loan is the best SBA-backed loan because it can come from private lenders or traditional banks. The maximum loan amount is $5 million and the minimum credit score is 650. A personal guarantee and collateral are also required.
  • Best term loan for small businesses. TAB Bank has the best term loan for small businesses looking for fast cash. The max loan amount is $300k and the minimum credit score is 650. A business lien and personal guarantee are also required.
  • Best loans for new small businesses. Fundbox offers a line of credit for new businesses that have at least 6 months of operating under their belt. The max loan amount is $150k and the minimum credit score is 600. Guarantees are sometimes required and the repayment timeline is short (24 weeks).
  • Best long term loans for small businesses. Funding Circle is the best long term loan for small businesses because cash becomes available very quickly. The max loan amount is $500k and the minimum credit score is 660. Business lien and personal guarantees are required.
  • Best short term loans for small businesses. Businesses that need a quick influx of cash can look to OnDeck for their short term loans. The max loan amount is $250k and the minimum credit score is 625. Interest rates are higher with this loan and repayments need to be made frequently. In addition, business liens and guarantees are required.

We hope that this guide has provided you with guidance and support so you can get a small business loan for your children’s activity business. If you are looking for additional guidance on managing and running your business, the team at Sawyer is here to help. Use our resources for support as well.

With our suite of tools, like custom forms to record allergies and t-shirt sizes, flexible payment options like gift cards and installment plans, and seamless scheduling and registration on any device, Sawyer saves business owners 28 hours per month. If you are ready to spend less time on admin and more time doing more of what you love, see how Sawyer can help with a free trial or demo.

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