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Business loans can give you the cash you need to purchase equipment or inventory to finance business expansion pay employees and cover other costs. Before you apply, be sure to understand how loans operate and what documentation you’ll need to your lender. Be aware of the time it can take to complete your application, as well as any fees that might be assessed.
Common uses of business loans
A business loan can help you pay for unexpected expenses, such as the damage to your workplace chair or the COVID-19 Pandemic. You might also need to borrow money to pay for an unavoidable expense such as upgrading or replacing technology, buying machinery for manufacturing, or even remodeling the interior of a store. Some lenders offer credit lines that allow you to draw funds as needed. The maximum amount is set and the interest is only charged on the amount drawn.
Application process and eligibility requirements
You will be required to provide specific information regarding your business including the official name of your company as well as its tax ID number and any financial records. This could include business plans or proposals, as well as profit and loss statements and the names and Social Security Numbers of those who hold 20 to 25 percent or more of your business. Some lenders require that you have been in business at least one year. Others accept startups, or do not have time-frame requirements.
It is helpful to have a mentor or adviser to guide you through the process of getting a business loan. Organizations such as SCORE have a network of volunteers who act as business mentors who provide low- or no-cost advice to small businesses and startup founders. You can find a local chapter and meet an advisor in person.