How to Get a 10k Business Loan

November 7, 2023

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For some, a 10k business loan may not sound like a lot. For small businesses, however, small business loans of any size, whether 10k or a 100k business loan, can be daunting. 

Small business owners may feel that it’s impossible to get small business loans, especially if they are a new business or have poor personal credit due to a personal loan or loans or credit cards. That’s not necessarily the case though.

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Steps to Get a 10k Business Loan

There are steps you can take, however, to ensure that your business is able to get a 10k business loan to grow and expand, without damaging your personal credit.

1. Research Types of Lenders

Before you can apply for a 10k business loan, you need to choose where you will apply. There’s more to that than meets the eye. 

You need to know your options. There are various types of lenders out there, and they are not all the same. Some types of lenders, and types of small business loans for that matter, work better for different types of businesses than others. 

For example, the most common type that everyone knows about are traditional lenders. These are banks and credit unions that offer traditional loans with standard terms. 

Then you have SBA lenders. These are traditional lenders that work with the Small Business Administration to process and distribute funds as part of their loan programs. 

Lastly, there are non-traditional lenders like Funding Circle and National Funding.  As a general rule of thumb these are online based lenders that often have fewer approval qualifications, or at least less strict qualifications for borrowers to meet. 

This means that small business owners may have an easier time qualifying for a loan from non-traditional lenders in many cases. 

However, interest rates are often higher than those offered by traditional lenders or an SBA loan. 

Determining which option works best for your small business is the challenge. That’s where research comes in. 

It can help to work with someone who is both familiar with the business and also has their finger on the pulse of the industry to help you determine which specific lenders would be a good fit.

2. Make Sure You Meet Qualifications

Never apply for small business loans without knowing beforehand that you meet the qualifications of the loan. This will save you both time and money. 

Some lenders make it appear that applying is as simple as filling out a quick online application. In some cases, it is absolutely that simple. 

In fact, with non-traditional lenders, you can often have funds in just a few days. That is only the case if you meet the qualifications however, 

If there are any questions as to approval, the process can become much more complicated. So, before you apply, make sure you are applying for a loan that you can get.  Here are some things to consider. 

Personal Guarantee

Take notice of whether a personal guarantee may be required. If so, and you need to give one, will you be able to? 

Time In Business and Annual Revenue Requirements

Is there a minimum time in business requirement? Many business owners find that they have to have been in business for a certain amount of time to qualify for a traditional term loan. 

Most traditional lenders, and even some non-traditional lenders, have a minimum annual revenue or monthly revenue requirement as well. 

Of course, these are just a few things to look for. Every lender has different requirements so make sure you check them all.

3. Improve Your Credit

This includes both personal and business credit. The end goal is to build business credit to the point you can get a small business loan with EIN only. Still, improving both credit scores is vital due to the personal guarantee requirement by some lenders. 

For personal credit, start by obtaining a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion). 

Review them for errors or inaccuracies and dispute any discrepancies you find.

Business credit reports work differently. You’ll need to pay for them and likely work with a professional to understand them. They also come from different providers. 

In fact, some small businesses do not even have a business credit report because they do not have accounts that report to the business credit bureaus. That means the first step is to build business credit. 

Obviously, to improve credit you have to meet obligations on time. If this is a struggle, set up reminders or automatic payments to ensure you never miss a due date.

On the personal credit side, high credit card balances relative to your credit limit can lower your credit score. 

It’s best to keep personal credit card utilization below 30%, if possible. Business credit cards do not have the same issue. 

 4. Improve Your P&L

After credit, the next major approval factor for most any loan type is profit. It’s hard to get credit approval if you cannot show you can repay the loan. 

For personal loans this means you have to show check stubs, tax returns, bank statements, and other personal financial documents. 

Small business loans, including short term loans, will require a Statement of P&L (Profit and Loss.) If yours isn’t great, it’s time to work on that. 

There are a few ways to do this. The idea is that you want to make more money that you spend. The first obvious idea is to increase revenue. 

Consider expanding your customer base, introducing new products or services, and strategically increasing prices. All of these are potential ways of increasing revenue. 

Even though raising revenue is often the first action a business owner takes, profit is not made up of revenue alone.

The first step should actually be to review costs. Sometimes a few simple tweaks in this area can have the most impact with the least amount of work. 

Start by considering your cost structure and looking for areas for cost reduction. This may mean negotiating better terms with suppliers or streamlining processes with new technology or automation.  

Don’t forget to review expenses, too. Cut out unnecessary operating expenditures, make sure energy is used as efficiently as possible, and consider outsourcing or automating where possible to reduce labor expenses. 

Managing working capital and cash flow is also important. Efficiently manage accounts receivable and payable to optimize cash flow, and implement effective credit policies. Monitor customer payments closely.

5. Prepare Documents & Apply for the Loan

Not all small business loans have the same application process. The process can vary by lender and by loan type. 

For example, the process of applying for an SBA loan is typically much longer than that of applying for a business line of credit from an online lender Funding Circle or National Funding. . 

If you find a lender that offers approval even with bad credit, and you happen to have bad credit, it’s likely the process will be much longer and more complicated as well. 

As a small business owner, it’s wise to keep some documents readily available and updated with current numbers, like revenue, so that they are easily accessible when you need to apply for small business financing. 

Online banking can make this easier, but it can be wise to save electronic documents to a hard drive as well to ensure they are really available when needed. 

This includes both business and personal bank returns, financials, and bank statements, among other things. 

Remember, not every application will ask for every document, but having them ready will make the process of gathering everything needed much faster and smoother. 

It’s also important to have a strong, professionally written business plan. You can add to it and adjust as needed when you apply for new funding, but there is no need to recreate the wheel each time.

Get Your Free Business Finance Assessment to Discover your Optimal Path to Improve Fundability™, Build Business Credit, and Get Business Loans

Tips for Qualifying for a Business Loan

As a small business, any step ahead you can get when it comes to applying for small business loans helps. Business loans are highly competitive, and sadly, the little guy can all too often get left behind. 

Business owners that do research lenders, keep their credit in order, and keep documents updated and ready to go are already ahead of the curve. These tips can help even more. 

When applying for an SBA loan, make sure you choose the right Small Business Administration loan program for your needs. For example, some are better for working capital while others are better suited for equipment or real estate purchases.

If you are trying to get a term loan, make sure the loan term is right for your business. If you can get a better interest rate with a shorter term, it may be worth considering. 

Stay on top of both your personal and your business credit score.  Don’t wait until you need business financing to find out there is a problem with bad credit.

Make sure you are applying for the right loan amount. If you are having trouble getting a certain amount, you may qualify to get less. In most cases, some is better than none.

Pros and Cons of Business Loans

It’s important to remember that small business loans are not the only type of business funding out there. There are other options. It’s up to each small business owner to decide on their own which type works best for them. 

Typically, it’s some combination of a few different methods. As for business loans, there are both pros and cons. 

The pros of small business loans, especially long term loans, include the potential for a low interest rate, the ability to spread out repaying over a longer amount of time, thus lowering the monthly payment, and being able to forgo using personal loans to finance a business. 

The greatest con to this loan option is likely the fact it can be difficult to qualify.

This is due to the sometimes complicated and lengthy application process as well as cash flow and annual revenue or monthly revenue requirements that can be hard for newer businesses to meet. 

In addition, small business loans are not quite as flexible as some other forms of financing. It can be difficult to use proceeds from a loan as working capital for this reason. 

More flexible financing options include a merchant cash advance or a business line. 

There is more than one business financing option out there. Figuring out which one is best for your business can be a challenge. Knowing what you have to work with is the first step. 

You may find your credit score will not allow you to get the loan amount you need in the form of a term loan at the time. 

In that case, you may have to use a merchant cash advance, business grant, or some other option until your credit score improves.

Get Your Free Business Finance Assessment to Discover your Optimal Path to Improve Fundability™, Build Business Credit, and Get Business Loans

FAQs

What Interest Rate Can I Expect to Pay on a $10K Business Loan?

As a rough estimate, interest rates on business loans can range from around 5% to 30% or more. However, it’s essential to get personalized quotes from multiple lenders to determine the specific rate you qualify for. 

Obviously this is a huge range. There really is no way to narrow it down. The key to getting the lowest interest rate possible for your business is to work hard to keep your personal and business credit score strong, and research lenders to find which ones are offering the best rates. 

Also, remember to consider other financing options available, like a merchant cash advance, if the interest rate on a term loan seems too high. 

Choosing the right lender, the right loan amount, the right type of loan, and keeping your credit strong are all ways to ensure you get the best interest rate possible.

How Long Does It Take To Get Funded After Applying for a $10K Business Loan?

Similar to the variance in interest rates, the time it takes to get funding after applying for a loan varies based on lender and loan type.

Generally speaking, alternative and online lenders often offer quicker loan processing times compared to traditional banks or a credit union. A couple of examples are Funding Circle and National Funding. 

Since you can apply for the loan online, the beginning of the process is much faster. 

Approval can be as fast as a few hours or up to a few days, and funds may be deposited into your business bank account within 1-5 business days.

Traditional bank loans typically have a longer application and approval process.

It may take several weeks to receive a decision, especially if the bank requires extensive documentation and underwriting.

Once approved, it can take additional time for the funds to be disbursed.

Small Business Administration (SBA) loans often have longer processing times due to their government guarantee and paperwork requirements.

The approval process can take several weeks to a few months.

After approval, it may take additional time to finalize the loan and disburse funds.

How Do I Get a Startup Business Loan With No Money? 

This is a tricky question. It’s hard to get any type of loan without money, but there are ways to fund your business until you do qualify for a loan. 

Start by funding your business with your own resources, known as bootstrapping.

This might include personal savings, contributions from family and friends, or income from a part-time job. 

You can also explore options such as microloans and crowdfunding. 

MIcrofinance institutions and community lenders sometimes offer small business loans, or microloans, to startups. They are designed for entrepreneurs with limited resources to finance their business. 

Crowdfunding platforms like Kickstarter and Indiegogo allow you to raise funds from individuals who believe in your business idea. In return, you may offer products, services, or equity in your business.

Business incubators and accelerators often provide funding, mentorship, and resources to startups in exchange for equity or as part of a structured program, rather than having strict credit or revenue requirements.

Don’t forget to consider a business grant also. Some government agencies and private organizations offer grants to startups in specific industries or for innovative projects. The best part is you do not have to repay business grants. 

Peer-to-peer lending is another possibility. Platforms like Prosper and LendingClub connect borrowers with individual investors.

Of course, business credit cards are an option for operating costs, but they will not work so well for real estate or large equipment purchases.

How Much Can I Realistically Get for a Small Business Loan?

The loan amount you can get depends on the lender, the type of loan(business line vs. term loan), and the ability of you as the business owner to meet the qualifications for approval. 

Traditional banks typically offer larger loan amounts, which can range from $50,000 to several million dollars, depending on your qualifications.

Business financing that is secured by the Small Business Administration will be limited to the amounts allowed by the specific SBA loan program.  For example, SBA 7(a) loans are available up to $5 million, 504 loans are available up to $5.5 million, and Express loans can only go up to $500,000.

That said, they are all designed for different types of needs, from working capital to real estate purchases. 

Online lenders often specialize in smaller loans, and you can typically obtain loans ranging from a few thousand dollars up to $500,000 or more.

About the author 

Faith Stewart

Faith has a BBA with a major in Accounting, and a combined 20 years of experience in the fields of finance and account.

Before switching to writing, she spent 10 years working in various areas of small business and personal finance and accounting, including working as a public auditor at BKD, LLP, Financial Director at Central Arkansas Development Council, and Commercial Credit Analyst at Farmer's Bank and Trust.

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