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How much small loans can you get depends on a myriad of factors, ranging from your credit score, the annual profit of your business, number of years you are into that business, your ability to pay back debt, type of lender and loan you choose.
Although every loan is unique, there are some general rules of thumb, on the basis of which, let’s find out how much a lender will loan you.
Loan types available for small business (maximum loan amounts)
There are numerous financing options available for a small business. Depending on factors like how fast you need capital and your credit score, you may look for an SBA loan, bank loan, online short-term loan or you can get two payday loans once. All these loans carry different maximum loan amounts.
Bank Loans: $5,000 +
In bank loans, you repay the amount plus interest over a fixed period of time. However, the loan amount may vary from bank to bank and borrowers to borrowers. You must have more than 700+ credit scores to get this loan
Short-Term Online Personal Loans: $5,000 to $500,000
Most short term online $5000 personal loans come with one or two-year repayment term. Such loans are a good option for buying inventory. To obtain this loan, your business must have completed at least one year period with annual revenue of $50,000. Generally, your credit score should be above 600.
Bank Lines of Credit: $5,000+
Like bank loans, these loans are not a lump sum. You get access to a specific amount of cash that you use whenever you want. It is an ideal financing option for business dealing with continual cash-flow issues.
SBA Loans: Up to $5 million
How much SBA loan you can get depends on your debt service coverage ratio (DSCR). Most lenders need a DSCR of 1.15 or higher.
Business Credit Cards: Up to $100,000
They are similar to lines of credit; you get a specific amount of money, which you draw as needed. You pay back a minimum balance each month.
Are small business loans based on personal credit?
Not entirely but yes to a large extent. Most lenders will see your personal credit score for loan application as they want to see how you manage debt. Before you apply for a small business loan, you should focus on building personal as well as business credit score. A personal credit score ranges from 300 to 850. Remember, the higher is better. Your target should achieve at least 600.
Is a small business loan secured or unsecured?
Every small business loan is unsecured that you can obtain without any collateral requirement If you’re ready to provide blanket UCC lien or personal guarantee. Look for the lender that offers loan without collateral. As long as you’re a responsible borrower, you don’t need to be worried about anything even if your loan is protected by collateral.
So, these are a few tips that can help you get a small personal or payday loan with bad credit. To get a quick loan at a low-interest rate, approach a reliable financial firm that especially helps small businesses or startups secure capital.