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7 Best Moments: When to Get a Small Business Loan

As an entrepreneur deeply invested in the trajectory of our venture, I’ve learned that timing is everything—not just in market entry or product launches but also in securing financial backing.

7 Crucial Moments: When to Get a Small Business Loan isn’t just a guideline; it’s a strategic framework that has empowered us to use financial leverage as a tool for growth and stability. Understanding these pivotal moments has been essential in navigating the complexities of business financing.

It’s about recognizing when injecting capital into your business can transform potential into achievement. Whether it’s for scaling operations, seizing market opportunities, or sustaining through unforeseen challenges, this insight has been invaluable for making informed decisions that propel our business forward.

Let’s explore these moments together and how they can serve as beacons for leveraging loans to fuel your company’s growth.

Are small business loans a good idea – When to Get a Small Business Loan

Good Business Idea - 7 Crucial Moments: When to Get a Small Business Loan

Small business loans are a great way to increase your cash flow and create a successful business quickly. However, knowing when this option is right for your company can be challenging.

The advantages and disadvantages of business loans.

Pro – Businesses that are typically turned down for traditional loans may qualify from alternative lenders.

Negative – Collateral may be required by banks and SBA loans and usually not required by online lenders.

Pro – Interest rates are capped as most lenders offer fixed rates.

Against – Personal liability in the event of a business failure. Many alternative lenders don’t require a traditional personal guarantee.

Pro – Small and large loan amounts are available from most lenders.

Con – Traditional lenders have a slow approval process while alternative lenders can approve same day with next day funding.

First, ask yourself these two questions:

“How does one qualify for a small business loan? ” and “How long does it take to get approved for a small business loan?”

When to Get a Small Business Loan?

As a business owner, the first question you must ask is, why do I need the money?

  1. Are you looking to start your business?

startups ideas

Getting funding from business lenders to start a business and securing financing options for your business ideas is the most challenging part of starting the business.  Few financial institutions, traditional banks, credit unions, or even alternative lenders want to bet on a pure startup.

These lenders rarely offer startup business loans.  As a fledgling business owner, you need to remain optimistic and persistent. We’re not going to sugarcoat it.  The odds are not favorable.

The first step is to decide whether you’re looking for a loan, which is debt financing or equity funding, which means you’re selling a percentage of your business.  There is no right or wrong answer. It’s whatever works for you.

  1. You Want to Expand and Grow Your Business Quickly

If you’re looking to expand your business in any way, a small business loan can quickly help you do so. Whether your business is already booming or you’re looking to infuse new life into your operations, business loans are a viable option.

Growing a business has many associated costs.  A small business loan allows you to take action without worrying if there won’t be enough money at the end of the month.

Once you have secured the loan funds, you can put them toward any number of expansion efforts- including advertising budget, purchasing a warehouse, renovating a space, and more.

  1. You Need More Inventory to Grow Your Business

inventory asset based loan

Most business owners agree that inventory is one of the most significant expenses. You’re spending money not only on the cost of purchasing the stock and materials, but you may be spending money to produce and store the inventory.

A small business loan can be a business line of credit, a merchant cash advance, a business term loan, or even accounts receivable financing.  All of these loan types can help you manage your inventory more effectively.

When you have more money in your pocket, you can quickly invest in a large amount of inventory and take advantage of volume discounts. Expanding your product lineup can exponentially increase the number of products you have on hand to sell.

All these options can help you quickly take your business to the next level.

  1. You’re Looking for More Cash Flow

Running a business on tight margins might ultimately stifle small business growth. Even if you’re making tons of sales, you might still be tight on cash if your operating costs are high. We recommend finding ways to create more significant margins in the long term, and a small business loan can help you do just that.

The key here is to get intimate with your financial statements.  You didn’t have to be a business finance major in college, but you should know your margins and your ROI (return on investment).

A sudden increase in cash flow can give you some breathing room to plot your future growth.

  1. You Need to Buy Equipment

All small businesses require some form of equipment, whether it’s expensive machinery, computers, telephone systems, or decor for a retail location. You can use a small business loan, equipment loan, or another type of equipment financing to pay for these expensive purchases without worry.

A small business loan can also help pay for unexpected costs relating to repairs or replacements when your equipment is on the skids. Having the proper equipment allows you to focus on other aspects of your business and grow more quickly.

  1. You’re Hiring New Employees

One of the most under-appreciated ways to use a small business loan is to hire new talent. Employees can be expensive, so bringing someone new on board might be a big leap for your business.

A small business loan allows you to grow your team quickly so you can create the business you’ve dreamed up. Bringing on the right employee for the job is one of the best ways to grow your business, so the investment will surely be worth it in the long run.

  1. You’re Buying Out Another Business

There are many reasons small businesses might buy out another business. If the company offers complementary or competitive services, acquiring the company can be a savvy business move. But most small businesses don’t have the funding to buy out a company.

Luckily, the right small business loan can help toward an acquisition.


How Do You Qualify for A Small Business Loan?


Qualifying for the Best Small Business Loan

If these 7 signs indicate your business could use a small business loan, you may be wondering: how do you qualify for a small business loan? Is a small business loan hard to get?  Every lender has slightly different requirements. Regardless of the lender, you’ll need a few things to qualify for almost any small business loan.

You’ll need to have an excellent personal and business credit score and potentially come up with collateral for your loan. Having these three elements will significantly increase your chances of getting approved.

  1. Time in business.  Banks want to see the last two to three years of personal tax returns and business tax returns.  Does that mean you’re out of luck if you’re a newer business?  No, most alternative lenders will consider your business for a loan after six months.  Depending on your industry and revenue, you might find some that will offer you a starter loan after three months of growing revenue.

With banks, you need to be ready for a 30 – 90-day experience.  The banks will want to see significant paperwork, including a business plan, Balance Sheets, and P&Ls. The alternative lenders start by asking for a one-page application and the last three months of business bank statements.

  1. Credit Score.  Traditional lenders will want to see a FICO score from the credit bureaus of 680 or better.  All owners must have strong scores to get the bank loan if they have a partner or partners.  This requirement is in contrast to the alternative or online lenders or any potential lender that usually only needs one owner or the majority owner.  These lenders will also consider FICO credit scores ranging from 500 to 750. So even poor credit won’t prevent you from gaining access to business lending.

Coupled with your personal credit score is your business credit.  Naturally, newer companies will have a thinner credit file than more established companies.  Regardless, it’s essential to build that business credit.  Sometimes having solid business credit will mitigate any weaknesses in your personal credit history and get you a better loan option.

  1.   Can you provide a bank with ironclad guarantees? Do you have the personal assets to back up your request?  Most banks will not consider a loan to your company unless it’s generating at least $500,000 a year in revenue.  Many banks want to see at least 7-figures a year.  Many online lenders will look for at least $10,000 plus a month at a minimum.  The online or alternative lenders will put more weight on the business’s health rather than just your credit score, making it a bit easier.  Regardless, look at number 4 below.
  2. Cash Flow. Put another way, do you make enough money to support the loan payment?  It would help if you were realistic when asking for money.  Look, we all believe our business is going to be a home run.  Why not?  It doesn’t cost anything to dream.  However, the reality is that no lender is looking for a promise of the future.  They want to see your history and look at that as an indication of the future.  You have to live within your means.  So be realistic. Don’t ask for $1 million when you’re just starting. Don’t ask for $1M even after 5 years in business unless this represents about 10% of your annual revenue.

Honestly, you’re better off auditioning for Shark Tank.  It might serve you well to watch a few episodes to see how the Sharks value companies and see how many get what they ask for as a company valuation.   Remember, unless the offer is being made by “Mr. Wonderful,” chances are the business owners are giving up equity and not getting a loan.

  1. Banks will always collateralize their loans with any asset you have.  Without any collateral to secure the loan, the bank often rejects an otherwise good business.  Does the bank want to know what will happen if you default?  How do they recoup their money? Don’t be surprised if your bank requires two to three dollars for every $1 you are borrowing.  Banks will collateralize their loans with cash, automobiles, real estate, equipment, or almost anything of actual value.  These can be personal or business assets, usually both. The collateral can also be accounts receivable.  On the flip side, the online lender will more often than not offer unsecured business loans.  While these loans tend to be more expensive, they don’t require you to collateralize all your assets.
  2. Industry. Like people, not all industries are the same.  Every business has inherent risks.  All risks are not equal.  A 3-month-old transportation company is riskier than one operating for the past ten years.  (See time in business above).  Likewise, a trucker is considered to be a higher risk than a dentist. That’s even if he’s operating for the same amount of time, revenue, and credit scores as the dentist.


How Long Does It Take to Get Approved for A Small Business Loan?

How long does it take to get approved for a small business loan? The lending process and timeline will vary by lender. When you need money quickly, Sunwise Capital will approve your small business loan with a one-page loan application.  Loan processing takes one day, with funding the next day.

If you qualify, loan amounts can range from $10,000 to $2M or more. This loan application process is fast and easy, while most banks take 30 – 90 days.

Getting Started

Carefully consider whether or not your business could benefit from a small business loan. If so, you can start researching lenders to find the one to suit your needs. You can call a Sunwise Capital rep at 888.456.9223 or See if You Qualify Now.    Good luck with growing your business!

Frequently Asked Questions (FAQs)

What are the “5 Crucial Moments” to consider a small business loan?

The 5 crucial moments include: when you’re ready to expand operations, during the launch of a new product or service, to bridge a cash flow gap, for purchasing inventory in bulk or equipment, and when you have the opportunity to refinance existing debt under more favorable terms.

How do I know if my business is ready for expansion?

A business may be ready for expansion if it has consistent sales growth, a solid customer base, and a clear understanding of new markets or additional services it can offer. Financial stability and the ability to manage the additional debt load are also key indicators.

Can a small business loan help launch a new product or service?

Yes, a small business loan can provide the necessary capital for research and development, marketing, and additional inventory or staffing to launch a new product or service successfully.

What does it mean to bridge a cash flow gap, and how can a loan help?

Bridging a cash flow gap means securing funds to cover short-term financial needs, such as payroll or urgent operational costs, during periods when business revenue is low. A loan can provide the liquidity needed to maintain operations without sacrificing business growth or stability.

Is purchasing inventory or equipment a good reason to take out a business loan?

Yes, a loan can be a smart investment if purchasing inventory or equipment in bulk can lead to cost savings or is essential for business growth. It allows businesses to leverage opportunities without depleting cash reserves.

When is refinancing existing debt a wise move?

Refinancing is wise when a business can secure a loan with lower interest rates or better terms than existing debt. This can reduce monthly payments and free up cash flow for other investments.

How do I determine the best time to apply for a small business loan?

The best time to apply is when you have a clear plan for the use of the funds, understand how the loan will contribute to your business growth, and when your financials show that you can comfortably manage the repayment.

What should I prepare before applying for a small business loan?

Prepare financial statements, a solid business plan, cash flow projections, and any documentation showing your business’s health and potential. A good credit history and a clear understanding of the loan terms are also crucial.

Are there alternatives to traditional small business loans?

Yes, alternatives include business lines of credit, merchant cash advances, crowdfunding, angel investors, and venture capital, depending on your business needs and situation.

Understanding when to leverage a small business loan is critical for correctly timing your company’s growth initiatives. Each of these moments can significantly impact your business’s trajectory, making it essential to consider your financial options carefully.

Mark Kane 2

Mark J. Kane, Founder & CEO of Sunwise Capital, is a distinguished entrepreneur with over 16 years in business financing. Beginning as a psychologist, he quickly became a trailblazing Hospital Administrator. Mark has built multiple ventures, notably accelerating a startup to $18M within months. His transition to Sunwise Capital stems from a deep-seated desire to empower business owners with strategic financial solutions. Recognized for his expertise, Mark's leadership at Sunwise Capital reflects his commitment to fostering business growth and success. Click the link to read more about the author.

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