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--- small_business_loans:a_checklist_for_comparing_options [2026/09/20 22:24] – created beaubroderick
+++ small_business_loans:a_checklist_for_comparing_options [2026/09/20 22:40] (current) – created kennethcrompton
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-Match the funding to the business cash flow.
+Business loans can finance operating needs, equipment, a purchase or expansion. A term loan and a revolving business line solve different cash-flow problems. Before looking for a provider, describe the use of funds and how the business expects to repay.
-Start with the use of funds and repayment source
+How the borrowing arrangement works
-Separate a one-time equipment purchase from recurring inventory or a gap between invoices and customer payments. State how the borrowing will support operations and when the business expects to generate the cash to repay it. Revenue alone is not the amount available after payroll, rent, taxes and other costs.
+Prepare current financial information and a realistic cash-flow forecast. Ask whether the product requires security, a personal guarantee or a minimum trading history. Keep the business's obligations separate from assumptions about consumer-loan protections.
+Costs and repayment
+Compare the payment frequency, full financing cost and any prepayment terms. Daily or weekly collections can affect cash flow differently from monthly payments. In the United States, SBA programs include 7(a), 504 and microloans, each with a different purpose and requirements.
+Preparing to compare offersPrepare a use-of-funds budget, bank records, financial statements and a realistic cash-flow forecast.Ask about business age, revenue, ownership, industry and credit requirements for the specific program.Identify collateral and any personal guarantee, including who is responsible if the business cannot repay.Questions worth askingWhat business need will the funds cover?Is a personal guarantee or asset security required?Does the repayment match the business cash cycle?A factor rate is not an APR
+If an agreement describes repayment using a multiplier, calculate total dollars due, deductions and payment frequency. For example, $10,000 multiplied by 1.3 is $13,000 before other fees, but the multiplier alone does not describe the annualized cost.
+Does SBA approve every small business?
+No. Eligibility and lender requirements apply, and the programs have different purposes.
+Is a merchant cash advance the same as a loan?
+It may have a different contractual structure. Compare it separately and review the actual agreement.
-Compare a term loan with a revolving line or other funding arrangement using the actual payment frequency. SBA-backed programs are delivered through participating lenders or intermediaries and have their own eligibility and permitted-use rules. An SBA guarantee does not mean the business owner is automatically approved.
+BorrowCompass provides a guide to this topic at [[https://borrowcompass.com/us/business-loans/|small business loan funding time]]. Review current provider terms before making a borrowing decision. BorrowCompass does not issue loans or guarantee approval.
-Other arrangements to compareInstallment financing
-For a defined purchase, compare a scheduled term with the useful life of the asset and cash generated.
-Secured borrowing principles
-Understand collateral and release terms, while checking the separate commercial contract requirements.
-Personal loan restrictions
-Do not assume a personal loan permits business use or separates personal liability from business risk.
-Documents and practical checksPrepare a use-of-funds budget, bank records, financial statements and a realistic cash-flow forecast.Ask about business age, revenue, ownership, industry and credit requirements for the specific program.Identify collateral and any personal guarantee, including who is responsible if the business cannot repay.Does an SBA-backed loan come directly from SBA?
-For the standard 7(a), 504 and microloan programs, participating lenders or intermediaries handle funding under program rules. Check the specific program and lender requirements. Disaster lending has a different process.
-What should I ask about a personal guarantee?
-Ask who signs it, the debts it covers, whether it is limited and how it can be released. A business entity does not by itself remove obligations an owner personally guarantees. Review the contract with a qualified adviser when needed.
-BorrowCompass provides a guide to this topic at [[https://borrowcompass.com/us/business-loans/|small business loan credit requirements]]. Review current provider terms before making a borrowing decision. BorrowCompass does not issue loans or guarantee approval.