How to Get a Business Loan: Step by Step

How do you get a business loan?

How to get a business loan comes down to seven steps: define the use, size the request, choose lender types, build the file, apply, compare written offers, then sign. A business loan is financing that a company repays on agreed terms, usually with interest and fees.

The application is only the middle of the process. The expensive mistakes come earlier and later: asking for the wrong amount, and comparing offers on a single number. This guide puts math on both.

Commera is a broker, not a lender. We compare offers from our lender partners.

Example: from need to signed offer

1. Define the use. Write down what the money buys and what that purchase should change in the business.
2. Size the request. Work back from the payment your cash flow can carry, then compare that figure with the cost.
3. Choose lender types. Pick the types whose main question your business can answer well today.
4. Assemble the file. Gather the records each lender type reads first, so the first review does not stall.
5. Apply and answer questions. Submit the same facts everywhere and reply quickly when an underwriter asks for more.
6. Compare written offers. Line up payment, total repayment, fees and estimated APR before you favor any one offer.
7. Sign or act on a denial. Sign only what you have read in full, or ask for the reasons and use them.

Expect a mixed result. Among applicants in the Federal Reserve's 2026 Report on Employer Firms, 42% received the full amount they sought, 36% received some or most of it, and 22% received none. That survey covers employer firms, so read it as a guide to them, not to every small business.

Partial approval is common, which is one more reason to know your number before you apply. If a fixed-payment product is what you have in mind, start with our guide to the business term loan. The steps below apply either way.

How much should you ask for?

The right request is the smaller of two numbers: what the purpose costs and what your cash flow can repay. Work out both before you talk to a lender, then use the smaller one.

Start with the goal. Write down what the money buys and what it should change. A new machine that adds capacity is a clear story. "Extra cushion" is not, and a vague request is hard to size.

Match the term to the asset. A long-lived machine can carry a longer term. A short inventory cycle should not leave you paying after the stock has sold. The term sets the payment, so this choice comes before the payment test.

Test the payment. The debt service coverage ratio divides the cash available for debt payments by the total debt payments. A higher ratio leaves more room for a slow month, and a ratio close to 1 leaves almost none.

Cost alone gives you the wrong answer, because a purchase can be sensible and still produce a payment the business cannot carry. Asking for too little has a price too, because a second request soon after the first means new paperwork and possibly new fees.

Worked example: sizing a loan request from cash flow

Sizing a loan request from cash flow means working backward from the payment the business can carry. This Commera illustrative calculation turns annual cash flow into room for a monthly payment, then into a rounded request.

Methodology: Commera illustrative calculation with assumed inputs, not an offer and not a real deal. Assume $180,000 a year of cash flow available for debt service and $60,000 a year of existing debt payments. The test coverage ratio of 1.25 is an assumption of this example, not a lender requirement.

In this illustrative calculation, pricing assumes a fixed rate, level monthly payments and a 2% origination fee withheld from proceeds. The estimated APR is the IRR of the 60 monthly payments against the $294,000 received. All terms are subject to underwriting.

Round down, not up. The rounded figure leaves part of the room unused, and the next table shows what it costs.

The rate is not the APR. The fee comes out of the money you receive, so you pay interest on dollars you never hold. That pushes the estimate above the stated rate.

In this illustrative calculation, the coverage row divides cash flow by existing payments plus about $78,273 of new annual payments. It clears the test used here, with a little room left. A real lender may calculate cash flow differently and may use another test.

Where can you get a small business loan?

A small business loan can come from a bank or credit union, an online lender, an SBA-backed lender, or an equipment or asset-based lender. Each type starts from a different question, and that question tells you which records to bring first.

Factoring is in the table because owners often weigh it at the same moment, but it is not a loan. A factoring company buys your invoices.

Results and surprises differ by lender type. Applicants at small banks were more likely to be fully approved (57%) than applicants at other lenders, according to the Federal Reserve survey. The share of applicants seeking financing at online fintech lenders rose from 17% in the 2020 survey to 29% in the 2025 survey, per the same report.

Approval odds are not the whole picture. Per the same report, 60% of borrowers at online lenders said costs were higher than expected, against 37% at small banks and 32% at large banks. Read those shares as a reason to get every cost in writing, not as a ranking of lenders.

So the practical answer to how to get a small business loan is to choose two lender types, not one. For the structures themselves, see our guide to types of small business financing. When you have a number and a lender type in mind, you can compare business loan options.

SBA-backed loans come from lenders, not from the SBA itself. Per the SBA loans page, 7(a) loans are delivered by SBA 7(a) lenders, and eligibility varies by lender and program. To find participating lenders, use Lender Match, the tool described in the SBA funding guide.

What will the lender check?

A lender checks whether the business can repay and what happens if it does not. That review usually covers five areas. Each lender sets its own standards, so treat this as a map, not a pass mark.

Cash flow. This is usually the first test for a term loan. The lender wants to see money coming in on a pattern that supports the new payment on top of existing ones.

Credit history. Expect a look at both the business record and the owner's record. Late payments, recent new debt and unresolved disputes all need an explanation. Have that explanation ready before anyone asks.

Time in business. A longer record gives the lender more to read. A short record leaves more weight on the owner and on projections.

Collateral. Some loans are secured by a specific asset, and others take a broader lien on business assets. Read the scope of any lien before you sign, because it can limit your next financing.

Personal pledge. Many lenders also ask the owner to back the debt personally. Of firms with debt, 59% gave a personal pledge and 51% used business assets, according to the Federal Reserve survey. A personal pledge can put your own assets behind the loan if the business cannot pay.

Records tell this story for you. The full document list sits in our guide on how to prepare your business for funding. Make the numbers in your application match the numbers in your statements. A mismatch costs more time than a weak number.

Worked example: comparing two $150,000 offers

Comparing two offers means reading payment, total repayment and APR together, because each one can point in a different direction. In this Commera illustrative calculation, the offer with fewer dollars of cost has the higher APR and the thinner coverage.

Methodology: Commera illustrative calculation with hypothetical offers, not real offers and not a real deal. The business is the one from the first worked example, with the same cash flow and existing payments, level monthly payments and each origination fee withheld from proceeds. The estimated APR is the IRR of 60 and 24 monthly payments against net proceeds of $147,750 and $145,500. All terms are subject to underwriting.

In this illustrative calculation, Offer B costs $14,928.12 less in interest plus fee. Read alone, that line ends the comparison. It should not.

In the same illustrative calculation, Offer B has an estimated APR of 19.14%, against 11.16% for Offer A. You pay fewer dollars because you hold the money for fewer months, not because the money is priced lower. Fewer dollars is not a lower price.

Offer B also fails the payment check in this illustrative calculation. Its $7,344.47 payment sits above the $7,000 monthly room from the first example. Its 1.22 coverage falls below the 1.25 test that example used.

Neither offer wins on every line. Offer A costs more in total and leaves more room each month. Offer B ends sooner and costs fewer dollars, if the business can carry the payment. Your choice depends on how long you need the money and how much strain cash flow can take.

You may have to do this math yourself. The Truth in Lending rules do not apply to credit extended primarily for a business purpose, per 12 CFR 1026.3(a)(1). So an offer may arrive with no APR on it.

Ask for the total repayment and every fee in writing. Then you can estimate the payment for other amounts and hold each result against the written offer. The written offer is the number that counts.

What should you do if the application is denied?

If the application is denied, get the reasons first, then decide whether to fix the file or change lender type. Federal rules give business applicants a route to those reasons. The route depends on the size of the business.

Gross revenue of $1 million or less in the prior fiscal year. Under 12 CFR 1002.9, the creditor must notify you of its decision within 30 days of receiving a completed application. You can then get specific reasons if you ask within 60 days, and the creditor has 30 days to answer, per the same rule. The notice can be oral, and your right to reasons may be disclosed at application, so check your application papers.

Gross revenue above $1 million. Per the same section, the creditor must notify you within a reasonable time. It must give written reasons if you make a written request within 60 days of that notice.

A denial is information, and it reflects one lender's review of one file, not the view of every lender.

After a denial

• Note the date. Record when and how you heard. The window for requesting reasons runs from the creditor's notice.
• Request the reasons in writing. A written request keeps a record, even where the rule also allows an oral answer.
• Match each reason to a fix. Sort them into what you can change now, what takes time and what this lender will not accept.
• Check your own records. Read your credit reports and statements for errors, and correct anything wrong before you apply again.
• Rerun the sizing math. A smaller request or a longer term may change the payment test. Rerun it before you change anything else.
• Change lender type only for a reason. Use the table above to pick a lender whose main question your business answers better.
• Compare the next offer in writing. A denial makes any yes feel urgent. Run the same comparison you would have run anyway.

An SBA-backed loan is one option after a bank says no. Per the SBA, when a bank thinks a business is too risky, the SBA can back the loan, which lowers the bank's risk. Lender and program rules still apply, so this is a route to check, not a promise of a different answer.

Broker disclosure: Commera Finance is a broker, not a direct lender. Financing providers make their own eligibility, underwriting, approval, pricing, and term decisions.