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How to Write a Successful Business Plan for a Loan

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Table of Contents

What does a loan business plan include?

What lenders look for in a business plan, business plan for loan examples, resources for writing a business plan.

A comprehensive and well-written business plan can be used to persuade lenders that your business is worth investing in and hopefully, improve your chances of getting approved for a small-business loan . Many lenders will ask that you include a business plan along with other documents as part of your loan application.

When writing a business plan for a loan, you’ll want to highlight your abilities, justify your need for capital and prove your ability to repay the debt. 

Here’s everything you need to know to get started.

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A successful business plan for a loan describes your financial goals and how you’ll achieve them. Although business plan components can vary from company to company, there are a few sections that are typically included in most plans.

These sections will help provide lenders with an overview of your business and explain why they should approve you for a loan.  

Executive summary

The executive summary is used to spark interest in your business. It may include high-level information about you, your products and services, your management team, employees, business location and financial details. Your mission statement can be added here as well.

To help build a lender’s confidence in your business, you can also include a concise overview of your growth plans in this section.

Company overview

The company overview is an area to describe the strengths of your business. If you didn’t explain what problems your business will solve in the executive summary, do it here. 

Highlight any experts on your team and what gives you a competitive advantage. You can also include specific details about your business such as when it was founded, your business entity type and history.

Products and services

Use this section to demonstrate the need for what you’re offering. Describe your products and services and explain how customers will benefit from having them. 

Detail any equipment or materials that you need to provide your goods and services — this may be particularly helpful if you’re looking for equipment or inventory financing . You’ll also want to disclose any patents or copyrights in this section.

Market analysis

Here you can demonstrate that you’ve done your homework and showcase your understanding of your industry, current outlook, trends, target market and competitors.

You can add details about your target market that include where you’ll find customers, ways you plan to market to them and how your products and services will be delivered to them.

» MORE: How to write a market analysis for a business plan

Marketing and sales plan

Your marketing and sales plan provides details on how you intend to attract your customers and build a client base. You can also explain the steps involved in the sale and delivery of your product or service.

At a high level, this section should identify your sales goals and how you plan to achieve them — showing a lender how you’re going to make money to repay potential debt.

Operational plan

The operational plan section covers the physical requirements of operating your business on a day-to-day basis. Depending on your type of business, this may include location, facility requirements, equipment, vehicles, inventory needs and supplies. Production goals, timelines, quality control and customer service details may also be included.

Management team

This section illustrates how your business will be organized. You can list the management team, owners, board of directors and consultants with details about their experience and the role they will play at your company. This is also a good place to include an organizational chart .

From this section, a lender should understand why you and your team are qualified to run a business and why they should feel confident lending you money — even if you’re a startup.

Funding request

In this section, you’ll explain the amount of money you’re requesting from the lender and why you need it. You’ll describe how the funds will be used and how you intend to repay the loan.

You may also discuss any funding requirements you anticipate over the next five years and your strategic financial plans for the future.

» Need help writing? Learn about the best business plan software .

Financial statements

When you’re writing a business plan for a loan, this is one of the most important sections. The goal is to use your financial statements to prove to a lender that your business is stable and will be able to repay any potential debt. 

In this section, you’ll want to include three to five years of income statements, cash flow statements and balance sheets. It can also be helpful to include an expense analysis, break-even analysis, capital expenditure budgets, projected income statements and projected cash flow statements. If you have collateral that you could put up to secure a loan, you should list it in this section as well.

If you’re a startup that doesn’t have much historical data to provide, you’ll want to include estimated costs, revenue and any other future projections you may have. Graphs and charts can be useful visual aids here.

In general, the more data you can use to show a lender your financial security, the better.

Finally, if necessary, supporting information and documents can be added in an appendix section. This may include credit histories, resumes, letters of reference, product pictures, licenses, permits, contracts and other legal documents.

Lenders will typically evaluate your loan application based on the five C’s — or characteristics — of credit : character, capacity, capital, conditions and collateral. Although your business plan won't contain everything a lender needs to complete its assessment, the document can highlight your strengths in each of these areas.

A lender will assess your character by reviewing your education, business experience and credit history. This assessment may also be extended to board members and your management team. Highlights of your strengths can be worked into the following sections of your business plan:

Executive summary.

Company overview.

Management team.

Capacity centers on your ability to repay the loan. Lenders will be looking at the revenue you plan to generate, your expenses, cash flow and your loan payment plan. This information can be included in the following sections:

Funding request.

Financial statements.

Capital is the amount of money you have invested in your business. Lenders can use it to judge your financial commitment to the business. You can use any of the following sections to highlight your financial commitment:

Operational plan.

Conditions refers to the purpose and market for your products and services. Lenders will be looking for information such as product demand, competition and industry trends. Information for this can be included in the following sections:

Market analysis.

Products and services.

Marketing and sales plan.

Collateral is an asset pledged to a lender to guarantee the repayment of a loan. This can be equipment, inventory, vehicles or something else of value. Use the following sections to include information on assets:

» MORE: How to get a business loan

Writing a business plan for a loan application can be intimidating, especially when you’re just getting started. It may be helpful to use a business plan template or refer to an existing sample as you’re going through the draft process.

Here are a few examples that you may find useful:

Business Plan Outline — Colorado Small Business Development Center

Business Plan Template — Iowa Small Business Development Center

Writing a Business Plan — Maine Small Business Development Center

Business Plan Workbook — Capital One

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U.S. Small Business Administration. The SBA offers a free self-paced course on writing a business plan. The course includes several videos, objectives for you to accomplish, as well as worksheets you can complete.

SCORE. SCORE, a nonprofit organization and resource partner of the SBA, offers free assistance that includes a step-by-step downloadable template to help startups create a business plan, and mentors who can review and refine your plan virtually or in person.

Small Business Development Centers. Similarly, your local SBDC can provide assistance with business planning and finding access to capital. These organizations also have virtual and in-person training courses, as well as opportunities to consult with business experts.

Business plan software. Although many business plan software platforms require a subscription, these tools can be useful if you want a templated approach that can break the process down for you step-by-step. Many of these services include a range of examples and templates, instruction videos and guides, and financial dashboards, among other features. You may also be able to use a free trial before committing to one of these software options.

A loan business plan outlines your business’s objectives, products or services, funding needs and finances. The goal of this document is to convince lenders that they should approve you for a business loan.

Not all lenders will require a business plan, but you’ll likely need one for bank and SBA loans. Even if it isn’t required, however, a lean business plan can be used to bolster your loan application.

Lenders ask for a business plan because they want to know that your business is and will continue to be financially stable. They want to know how you make money, spend money and plan to achieve your financial goals. All of this information allows them to assess whether you’ll be able to repay a loan and decide if they should approve your application.

Home » Blog » Business Loans » How To Write A Business Plan For A Loan

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How To Write A Business Plan For A Loan

A solid business plan is often critical to securing funding for your small business. Learn how to create a business plan for a loan that includes the information lenders want to see.

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A business plan is a crucial business document you need to have on hand when applying for business loans. However, the mere thought of writing a business plan for a loan is intimidating to a lot of business owners.

A one-page business plan may be sufficient for certain types of small business loans (for example, online loans), but bank loans and SBA loans typically require a more in-depth business plan that delves further into your financials.

If you need to write a business plan for a loan, you’ve come to the right place. Keep reading to learn more about everything you need to include in your business plan to improve your chances for loan approval.

Table of Contents

What Is A Business Plan For A Loan?

10 key sections to include in your business plan, what do lenders look for in a business plan, business plan examples, resources for writing a business plan for a loan, final thoughts on writing a business plan for a loan, faqs about how to create a business plan for a loan.

A business plan is a written document that provides a complete overview of your business, including information about your business’s services, strategies, finances, and goals. All businesses should have a business plan, but a business plan is especially important when applying for a business loan .

Most business plans should include some version of the following sections. Depending on your industry and other factors, such as whether you own a startup or established business, some sections could be condensed or combined. The exact verbiage for section titles can vary, as well.

For a business plan that’s longer than one page, it’s a good idea to preface these sections with a cover page and table of contents.

Executive Summary

This section is a condensed version of your entire business plan. It will likely include:

• Details of when, how, and why you started your business
• Your company mission statements
• High-level financial information about your business
• An explanation of how funding will help your business

Depending on whether you’re a startup or an established business, you may use this section to focus on your growth strategy or your past successes.

Company Description

Use this section to delve deeper into your company’s offerings, core principles, legal structure, and leadership. Your company description should also include your unique value proposition . Describe your company’s unique strengths that will ensure your success.

Products & Services

This section should detail the products and/or services your company provides. Make clear the problem that your offerings solve. Include information such as:

• Information on your raw materials and production process (if applicable)
• Profit margins
• Whether you have or plan to file patents or copyrights

Market Analysis

Use this section to demonstrate your understanding of your overall industry and the specific markets you serve, including market trends, competitors, and the demographics of your target customers. Some companies hire a consultant or agency to perform the research for the market analysis section.

Marketing & Sales Plan

Building off your market analysis, how will you market to your target customers and beat your competitors? How will you sell to them and distribute your product? What are your sales goals and projections? Provide these details in this section.

Organization & Management

Use this section to include your organizational and leadership structure, ideally including an organizational flowchart. Also include job descriptions, qualifications, and years of experience to demonstrate why your team is capable of delivering on your company goals and is worthy of investment.

Operational Strategy

This section is used to describe your day-to-day operational processes, including information about your location, facility, equipment, inventory, and daily production. If you have a service-based business, this section may focus more on your team’s daily activities and how they contribute to long-term goals.

Financial Outlook

This section should tell lenders how much you spend and how much you make in profits. Include up to five years of data if possible, including financial documents such as:

• Income statements
• Cash flow statements
• Balance sheets
• Capital expenditure budgets
• Sales forecasts
• Projected income statements
• Information on any collateral you have to secure the loan

Depending on how much financial documentation you have, you might refer to specific documents in this section and indicate that the full documents can be found in the Appendix section.

Though startups may not have all of this data, you can make projections based on monthly or quarterly data and industry averages.

Funding Request

Now that you’ve laid out your expenses and financial projections, it’s time to make your case for a loan. Be clear about how much money you need, how you will spend it, and how you will repay the loan. Be as detailed as possible.

In the Appendix, include any supporting documents, such as financial documents referred to in the Financial Outlook section. Some other types of documents you might include in this section are:

• Business licenses  or permits
• Credit reports
• Product photos
• Marketing materials
• Letter of intent to purchase business

If you know what lenders are looking for in a business plan for a loan, you will increase your chances of approval. Learn the five things lenders want to see in your business plan, followed by five tips to create a loan-worthy business plan.

The 5 Cs Of Credit

The Five Cs of Credit is a phrase that summarizes what lenders look for when deciding whether to extend a loan to a business. Lenders will, accordingly, look for the five Cs when reviewing the business plan in your loan application. The five Cs are:

• Character: Your knowledge, experience, and creditworthiness
• Capacity: Your ability to repay the loan
• Capital: How much you have already invested in your business
• Conditions: Your market viability, considering your industry as well as overall economic conditions
• Collateral: Assets you can use to secure the loan

5 Business Plan Tips For Loan Approval

Besides emphasizing your “5 Cs,” there are a few other things you can do to make the best impression with your business plan to increase your chances of securing funding.

• Avoid Industry Jargon: Use plain English rather than industry terminology that the lender might not be familiar with. Remember that the loan underwriter may not have deep knowledge of your specific industry.
• Show Cash Flow: Cash flow is one of the most important factors that determine loan eligibility. You can even get a loan with bad credit as long as your cash flow is sufficiently high. The more insight you can provide into your past, current, and future cash flow, the better.
• Show Your Investment: Before extending a loan, the lender will want to see that you have already invested some of your own resources, such as personal savings, into your business. Be sure to include documentation that demonstrates your investment.
• Enlist Help: You will likely need some professional assistance in creating your business plan, whether that means hiring a writer, an industry consultant, or both. At the very least, you should have a third party review your business plan before you submit it as part of a loan application.
• Revise Your Plan As Needed: If this is the first time you’ve taken a close look at your business strategy and financials, you will surely learn some things about your business while creating your plan. For example, you may realize you cannot afford a business loan as large as you planned to ask for. Rather than trying to justify the number you started with, it’s better to modify your funding request (and other aspects of your plan) to align with your financial reality.

It’s easy to find templates and examples of business plans online. Though you may not want to copy and paste from a template verbatim, these samples provide a starting point and show you different ways a business plan can be structured. Here are a few to start with:

• Business plan template for a startup (from SCORE)
• Business plan template for traditional businesses  (from the SBA)
• Business plan template for retail or eCommerce (from Shopify; requires email address)

These tools and resources can help you create a solid business plan for a loan. While some free business plan creation tools are available online, you will have to pay for some options.

SBA Business Plan Resources (Free)

The SBA has a great resource in its online learning center that includes business plan worksheets . In addition to business plan templates, the SBA also helps you connect to free local business counselors who may be able to help you with your business plan.

Business Plan Software ($)

If you need extra help creating a business plan and don’t mind spending a little bit of money, consider business plan creation software. For example, LivePlan ($20/month) is business plan software that connects with QuickBooks to import your financial data to your plan.

Business Plan Writer/Consultant ($$$)

If you’re willing to invest more heavily into your business plan, consider hiring a writer or consultant that specializes in creating business plans. This option costs anywhere from $2,000 to $20,000, with the lower end of that scale typically including only basic writing services and the higher end representing a specialized industry consultant agency.

While it’s helpful to know how to write a business plan for a loan, you can always hire someone to help you draft the plan if the task is too daunting. A business plan is a worthwhile investment no matter what type of business you have or whether you are currently trying to secure business funding. Even if you don’t need a loan right now, it’s important to maintain an updated business plan to serve as a guide for your own business decisions.

Was your loan denied because of your business plan (or another reason)? Learn what to do if your business loan was denied .

Do you need a business plan to get a loan?

No, you do not always need a business plan to get a loan. Most traditional business lenders, including banks and SBA lenders, do require a business plan. However, a lot of online business lenders (such as OnDeck ) do not ask for a business plan.

How do you write a business plan for a bank loan?

To write a business plan for a bank loan, you first need to lay the groundwork by analyzing your business’s finances, strategies, and market conditions. Alternatively, you can hire someone to do this research for you. Once you have all this information, you can use a guide, template, or software to help you organize it into a business plan.

How do you write a business plan for an SBA loan?

To get an SBA loan, you will usually need a comprehensive business plan, including a detailed plan for how you intend to use the funds. On the SBA website, you can find general information about what to include in a business plan, or you can download a free business plan template. Some online SBA loan services, such as SmartBiz , do not require a business plan.

How long should a business plan be?

There is no set length for a business plan. A typical business plan used to secure financing might be 20-40 pages. A so-called “lean business plan” that serves as an internal company document for a small business may only be one or two pages.

Who writes business plans?

Business plans are often written by the business owners themselves, but you can also hire a freelance writer or consultant to write a business plan. A business plan writer will still need the business owner’s input (and access to the business’s financial documents or accounting software ) in order to prepare the plan.

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Why Do I Need a Business Plan?

Sections of a business plan, the bottom line.

• Small Business

How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

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A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
• Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character : You can stress your good character in your executive summary, company overview, and your management team section.
• Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
• Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

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SBA Business Plan Template: Full Guide [2023]

• January 12, 2023
• Small Businesses

In 2020, SBA’s flagship 7(a) loan program approved more than 42,000 loans totalling $22 billion . Yet, SBA loans are notoriously difficult to obtain for small businesses: less than 15% of SBA loan applications were granted by big banks. If you’re applying for a SBA loan , you will need a solid business plan template for your loan application.

In this article we go through, step-by-step, all the different sections you need in your business plan to build a complete, clear and solid business plan lenders will approve. Read on!

Why do you need a business plan for your SBA loan application?

Other than your basic eligibility requirements, the primary element that lenders would review is your business plan. Having a good business plan determines if your business is a lucrative opportunity for SBA lenders.

Also, a solid business plan makes it easier to get your loans approved because banks would be confident that your business would be successful and you would be able to repay your loan.

However, business plans tend to differ depending on the nature and status of your business. If you’re running an independent business or launching a startup for example, your business plan will be reviewed more thoroughly.

1. Executive summary

The executive summary is the most important page of your SBA business plan template . We can’t make this clearer. This is the first section that the lenders will have a look at.

Before we go into specifics, keep in mind the executive summary actually is a summary. Keep it brief: your executive summary should never be more than 2 pages maximum .

Your executive summary should consists of 5 parts:

• The “mission statement “: what problem(s) is your business solving?
• Product and service : what is it that you sell? to whom? where?
• People : who are the founders / management? What about their experience? How many people / teams do you employ?
• Key financials and projections : what are your key metrics and financials today (revenues, customers, etc.)? What do you expect these to be in 3/5 years from now?
• Funding ask : what (how much) are you asking as part of this loan? Where will you spend it? For what?

2. Company description

The company description is where we go into more details about your business, and which problem(s) it actually solves.

You should explain here clearly:

What is the problem at stake?

You should list here the 2/3 friction points you aim to tackle.

Remember: even if your business isn’t necessarily innovative, your business is potentially solving a problem, as obvious as it may be, for many people out there. The more obvious the problem is, the more people it affects, the better

What is your solution?

Your business is commercialising a product and/or a service which solves the problem mentioned above. Here, you should explain 2 things: how your product / service works, and what benefits it brings to your customers.

Ideally, you should compare the pain points explained earlier (the problem) to the benefits your solution brings to your customers. That way, it is crystal clear to lenders and investors your solution really adds value to potential customers .

When explaining your business’ solution, you should explain clearly who is your customer persona . In other words, who are your customers (or who do you think they will be)? Which gender, age range, social background, interests, etc?

Where are you going?

The third section of the company description should explain what your strategy is in the short to long term. Are you expecting to launch new products? To expand regionally, internationally? Etc.

3. Market plan and analysis

The market plan and analysis section tell investors and lenders that you have extensively studied the market and reveal your competitive plan.

Your market plan and analysis section should include the following:

Industry overview and outlook

Here you need to clearly identify 2 very important metrics:

• Market size : how big is your market?
• Market growth: how fast does your market grow?

If you are operating in a niche market, chances are that you will face some challenges: the information might not be publicly available. In any case, you should be able to make a high-level estimation of your market. Read our article on market sizing and how to estimate TAM, SAM and SOM for your startup .

When looking for these metrics, you have multiple sources of information: public reports, specialised press, etc. Even public companies publish press releases and annual reports including some of their proprietary market estimates so be sure to look there too.

Competitive landscape

Here we must answer 2 key questions:

How fragmented is your market?

Are there 3 big players sharing 90% market share or thousands of small players? Here, refer to public market reports and your own understanding of the competitive landscape .

A few questions you could ask yourself, among others:

• Who are your competitors?
• Are they local, regional, national or global?
• Are there any product alternatives to your product?
• What about their IP / technological advantage?

Where do you position yourself vs. competition?

Is your solution a game changer other competitors don’t have (yet)? Do you have competitors with similar products/services?

Ideally, you would create a small table with, for each type of competitors and their main characteristics.

For instance, do they all a global presence? Do they cover all the products you offer? What is their relative price positioning (expensive vs. accessible)?

4. Organization and management

The amount of details you need to include here varies depending on the size of your company.

No matter how many leadership roles there are, an organizational chart effectively shows lenders and investors how the management system is structured.

If you plan on running your business alone indefinitely, you can write a short paragraph explaining your qualifications and previous professional experiences.

The first thing you should include in this section is a list of each management position. This list includes who will fill the role and the qualifications of these people. These people are the heart of your company, and their skills and experience are vital in ensuring your company’s success.

Next, provide any additional information about how the management team will contribute to the business’s success. Be sure to give as many details as possible since lenders need to be comfortable and confident that you have a good team running your business.

Lastly, include information about the Board of Directors (and/or any other advisors to your business).

5. Service or product line

The level of detail and the content of this section changes depending on the type of business you have. A number of questions you need to answer are shown below (but not limited to):

• Are you selling products or services (or both)?
• How many products do you sell?
• What are they?
• What is their pricing?
• How do they work?
• Are your products protected by any kind of intellectual property (copyright, patent, etc.)?
• If you do not manufacture all of your product(s): who are they suppliers? Where do they fit in the value chain ? etc.

Expert-built financial model templates for tech startups

6. Marketing and sales

Your SBA business plan template should include a marketing and sales plan where you describe your strategy for acquiring potential clients.

Here, you should give details about your marketing plan. A few questions you should answer are:

• How you plan to build and support your sales strategy ?
• What channel(s) are you using (online vs. offline)?
• How it makes sense for your target audience (the customer persona mentioned above)?

What about your metrics?

Sales and marketing goals and KPIs are also provided in this section. Don’t forget to include a detailed report about budgets for both sales and marketing.

Include metrics such as conversion rate, customer acquisition cost (CAC) , the efficiency of your sales team, etc.

It’s ok if you don’t know them already (if you are about to launch you new venture for example), yet you should have at least targets for them. How many website visitors do you expect to generate next year? What is your target conversion rate? Etc.

This particular report would be of great interest to lenders since they will glimpse how you handle your budget. Indeed, if you expect to spend in average $100 Customer Acquisition Cost, lenders will tie the number into your financial projections later on (more on that below).

Proving lenders you are able to link your financial projections with your actual business metrics (customers, sales volume, etc.) is a big plus . Indeed, that way you will show lenders you understand very clearly your business and how it ties into your financials (more on that in our article on why you should build a solid financial projections ).

7. Funding request

The funding request is the section of your SBA business plan template where you communicate to your investors how much you need.

This report also includes how you plan on repaying your loan. It’s also essential to explain how you plan to spend the funding you’ll receive for your business.

Will you spend the loan in working capital , in equipment, in inventory, salaries or marketing costs? The more specific you are, the better.

If you haven’t done so, we really recommend you read our article on how to determine how much you should raise for you business . While raising too little creates obvious problems, raising too much isn’t necessarily better.

On top of the amount, a good practice is to include a pie chart of where you will spend that money over a given period (your runway). Will you spend the bulk of it in product development to build your MVP? Or will you use a large portion in sales & marketing to commercialise your product and find product-market fit?

Our financial model templates include a cash burn dashboard where you can easily assess how much you should raise, and where you will spend your money. We also included charts ready to be included in your pitch deck. See how to use our cash burn dashboard here .

The funding request usually includes an overview of the business. You also have to outline how much funding you need for the next five years.  The standard timeframe for repaying your loan is usually ten years, so lenders expect to see some success in your business by that time. Mention a  detailed explanation of how the funds will be used and strategic financial plans for the future here.  Include financial information for current operations if applicable.

8. Financial projections

The financial projections section of your SBA business plan is one of the most important one.

Why? Lenders will have a thorough review of your expected financials over the next 3 to 5 years and judge whether your financial projections:

Are realistic (and use verifiable assumptions)

We are all by nature optimistic, especially when we are running businesses. It’s good to be optimistic, yet it is another one to be unrealistic.

Also, when presenting your financial projections, make sure to make it clear what are your assumptions. The more sources you can find to back up your forecasts, the better.

If you need help building realistic projections for your business, we have lots of free content. Make sure to check out our guides below:

• The 5 Mistakes To Avoid For Your Startup Financial Plan
• How To Build Realistic Revenue Projections For Your Startup?

Allow you to repay the SBA loan in the future

It’s great if you have built rock-solid and realistic financial projections for your business plan. Yet, if your plan doesn’t allow you to meet your debt obligations (the SBA loan and any other debt your business might have), lenders will not grant you any loan.

When assessing whether your financial plan allows you to repay the debt, you should check if the positive cash flows your business generates are enough to cover your debt repayment (and interests).

What financials should you include?

In short, you should present 3 different set of financials:

• Profit-and-loss
• Balance sheet
• Cash flow statement

If you don’t know them already, these are the financial statements every business need to prepare at least annually (with the help of an accountant). For more information on what they are and how to prepare them, read our articles below:

• 4 Key Financial Statements For Your Startup Business Plan
• SBA Loan Application: 6 Steps To Build Solid Financial Projections

9. Appendix

This section is the best place to add supporting documents like charts, graphs, and data.

For example, a complete list of documents like licenses, contracts, maps, etc. makes you more attractive to lenders as it gives them more content to review. If you do so, make sure to reference the documents in appendix and link them to pages in earlier sections. Avoid using the appendix as a dump section: it should be well organised and structured (else no one will bother looking at it).

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How to Write a Business Plan for a Loan

Business plans are often required when applying for funds from venture capitalists or other private investors, but even if you are seeking a bank loan for your company it is very helpful to prepare one since the lender wants to be confident that he is taking on an investment with growth potential so that you can repay the loan.

In this article, you will learn about the types of business loans, the importance of the business plan in your application for a loan, and how to write a business plan that will help you get the funding you need for your company.

Download our Ultimate Business Plan Template here

What Is a Business Loan?

A business loan is funding that is provided by a financial institution to a company for it to carry out its day-to-day operational activities. It also supports the purchase of equipment, refinancing of debt, and other purposes. Small businesses might need these loans because they may not have enough funds to buy equipment, refinance debt, or because they encounter financial difficulties.  

Your Loan Application

You can apply for a commercial loan with your local bank, credit union, Small Business Administration (SBA) lender, or community development financial institution like Capital Impact. You should expect that the lender will ask you detailed questions about all aspects of your business to ensure that he or she is lending you money that will be repaid.

In addition, if you are looking to purchase a business or commercial real estate, the lender may ask for additional information and documentation to assess your qualifications and ability to repay the loan.

Before applying for a business loan it can be helpful to research different types of loans so you understand what is available and what you will need to pay attention to in your loan proposal.

Common Types of Business Loans

There are many types of loans for small businesses, including:

• lines of credit
• commercial mortgages
• equipment financing

Contact different lenders in your area to see what kind of loan terms they offer and if their interest rates are within your budget.

What is a Business Plan?

A traditional business plan is a document that provides an analysis of the present situation and future financial projections for a company. It includes details about the owners, management team, customers, location of the business, finances, marketing plan, and other information.

A comprehensive and well-researched business plan will help lenders make informed decisions about providing a loan for your business.

To help you get started, you can download our sample business plan for bank loan pdf .

Why Do You Need a Business Plan to Get a Business Loan?

A loan proposal business plan is your opportunity to show the lender you understand your business, its capabilities, and how it operates within the industry in which it competes. By putting together a clear and concise document that outlines all of this information, the lender should have a much easier time understanding how you have arrived at your numbers and where you are going in the future.

A business plan is also helpful to the lender because it provides an opportunity for him or her to ask you questions, further clarifying details that might not be clear from your application materials alone. This way the lender can walk away from the meeting with a good understanding of what he or she is loaning money to and how likely it is he or she will see the loan repaid.

How to Write a Business Plan to Get Approved for a Loan

Different lenders may ask for different sections of your business plan, but most require some combination of the following key elements.

1. Executive Summary

The Executive Summary is the first section of your business plan that a lender will read, but typically the last section written. It is very important because it acts as a snapshot of your business plan and allows the person reading to get an overview of what you are proposing.

The summary should include:

• A statement about why you need the business loan
• Details on how much money you want to borrow, when you will repay it, and interest rates
• A description of how the proceeds from the loan will be used
• Your business’s historical and projected financial information (again)
• The expected impact on your company and the industry as a whole if you are successful.

2. Company Description

In the Company Description, you should include basic facts about your company such as:

• What is the business structure (corporation, partnership, limited liability company (LLC), etc.)?
• How long has your company been in operation?
• What is the size of your workforce?
• What accomplishments or milestones have you achieved within the last year?

This section should also include information about your future business plans.

• How do you plan to expand, if at all?
• Who are your main competitors and how is your company different from them?
• What changes will you make to excel against these competitors?

3. Industry Analysis

In the Industry or Market Analysis, you should include information about your industry in general.

• What are the strengths and weaknesses of your industry?
• How will your company compete in it?
• What trends within the industry affect its future success or potential struggles?

You may also include information about your specific niche in the market. If your company operates in a very specific area of the industry, be sure to highlight it.

4. Customer Analysis

The Customer Analysis section of your business plan helps a lender understand who your customers are and why they will buy from you.

In this section, you should include information on the following:

• Your target audience and the individual customer segments
• How many potential customers you have within your target market
• How much your customers typically spend, and how much you expect them to spend in the future
• What has caused these changes or trends to occur and how they will impact your business

5. Competitive Analysis

This section should show the competitive landscape and how you plan to compete against your competitors.

• What are their strengths?
• Where do they fall short?
• What changes will you implement to get ahead of them?
• What are your company’s competitive advantages over these competitors?

6. Marketing Plan

This section should include a detailed description of the marketing strategy you plan to implement.

• What is your customer acquisition cost? How much will it cost you to bring in one new customer?
• How will you reach these potential customers? Be specific about your marketing strategy, advertising methods and costs.
• Who is responsible for implementing each part of the marketing plan and how much it is expected to cost?

7. Operations Plan

Your Operations Analysis should describe the way your company currently operates and how it will operate with the help of the loan.

• What are your company’s strengths? Weaknesses?
• What have you implemented in the past 12 months that has led to increased revenue, decreased costs, or improved efficiency?
• How will you continue to operate efficiently with the proceeds?

8. Management Team

In the management section, you should describe your business in terms of its personnel structure.

• What are the responsibilities of each person on your team?
• Who are they? What are their qualifications?
• How will their roles change when you receive the loan proceeds?

9. Financial Plan

This section should include your company’s financial statements include the projected income statements, projected balance sheet, and cash flow statements for the next 3 – 5 years.

You can assume that you will receive loan proceeds in 20XX, so plan accordingly.

Include a five-year break-even analysis and an explanation of how you arrived at your income statement and cash flow projections. Don’t forget to include interest and loan payments in your financial projections.

10. Appendix

In this section, you will include the supporting documents for the claims within your business plan. This section should include:

• A loan agreement
• A list of all applicable business licenses, permits, etc. that your company holds or has applied for

You may also include:

• An organizational chart for your company
• The resumes of the members of your management team
• The resumes of any employees who will be making a significant impact on your business with the loan money
• Copies of contracts, leases, and other agreements that are relevant to your business plan
• Complete financial statements and projections if you only include a summary in the Financial Plan section

These documents should be attached to your business plan in a separate file if they are not included and may need to be submitted with the final small business loan application.

Tips for Writing a Business Plan for a Loan

To have a successful business plan and loan application, you need to know exactly what information your loan officer is looking for and how to find it.

• Before you submit your application, be sure to carefully edit and proofread it for errors. Errors in a business plan may lead a lender to question your attention to detail, so make sure it is polished and error-free.
• Always be sure to include an executive summary of the main points of your plan at the beginning, as some loan officers may not read all of the details.
• Be sure to keep your tone professional and business-like.
• Include detailed financials, market analysis, and other crucial information.
• Remember that any omission or inaccuracies will be carefully scrutinized by a lending officer, so be sure you have all of the necessary documents before submission.
• Finally, remember that lenders often appreciate creativity and outside-the-box thinking when it comes to business plans, but don’t let it distract from the necessary information for your application.

Writing a good business plan is one of the most important and necessary steps toward securing a loan or other source of capital.

Use our proven business plan template provided below, and you’ll be able to give your lender all of the information they need to make an informed decision.

The key is to do it right. By following the steps outlined above and including all of the necessary documents (and editing/proofing your application), you should significantly improve your chance of securing a loan for your business.

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With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

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How To Write a Business Plan

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Starting a business is a wild ride, and a solid business plan can be the key to keeping you on track. A business plan is essentially a roadmap for your business — outlining your goals, strategies, market analysis and financial projections. Not only will it guide your decision-making, a business plan can help you secure funding with a loan or from investors .

Writing a business plan can seem like a huge task, but taking it one step at a time can break the plan down into manageable milestones. Here is our step-by-step guide on how to write a business plan.

Table of contents

• Write your executive summary
• Do your market research homework
• Set your business goals and objectives
• Plan your business strategy
• Describe your product or service
• Crunch the numbers
• Finalize your business plan

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Step 1: Write your executive summary

Though this will be the first page of your business plan , we recommend you actually write the executive summary last. That’s because an executive summary highlights what’s to come in the business plan but in a more condensed fashion.

An executive summary gives stakeholders who are reading your business plan the key points quickly without having to comb through pages and pages. Be sure to cover each successive point in a concise manner, and include as much data as necessary to support your claims.

You’ll cover other things too, but answer these basic questions in your executive summary:

• Idea: What’s your business concept? What problem does your business solve? What are your business goals?
• Product: What’s your product/service and how is it different?
• Market: Who’s your audience? How will you reach customers?
• Finance: How much will your idea cost? And if you’re seeking funding, how much money do you need? How much do you expect to earn? If you’ve already started, where is your revenue at now?

Step 2: Do your market research homework

The next step in writing a business plan is to conduct market research . This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to gather this information. Your method may be formal or more casual, just make sure that you’re getting good data back.

This research will help you to understand the needs of your target market and the potential demand for your product or service—essential aspects of starting and growing a successful business.

Step 3: Set your business goals and objectives

Once you’ve completed your market research, you can begin to define your business goals and objectives. What is the problem you want to solve? What’s your vision for the future? Where do you want to be in a year from now?

Use this step to decide what you want to achieve with your business, both in the short and long term. Try to set SMART goals—specific, measurable, achievable, relevant, and time-bound benchmarks—that will help you to stay focused and motivated as you build your business.

Step 4: Plan your business strategy

Your business strategy is how you plan to reach your goals and objectives. This includes details on positioning your product or service, marketing and sales strategies, operational plans, and the organizational structure of your small business.

Make sure to include key roles and responsibilities for each team member if you’re in a business entity with multiple people.

Step 5: Describe your product or service

In this section, get into the nitty-gritty of your product or service. Go into depth regarding the features, benefits, target market, and any patents or proprietary tech you have. Make sure to paint a clear picture of what sets your product apart from the competition—and don’t forget to highlight any customer benefits.

Step 6: Crunch the numbers

Financial analysis is an essential part of your business plan. If you’re already in business that includes your profit and loss statement , cash flow statement and balance sheet .

These financial projections will give investors and lenders an understanding of the financial health of your business and the potential return on investment.

You may want to work with a financial professional to ensure your financial projections are realistic and accurate.

Step 7: Finalize your business plan

Once you’ve completed everything, it's time to finalize your business plan. This involves reviewing and editing your plan to ensure that it is clear, concise, and easy to understand.

You should also have someone else review your plan to get a fresh perspective and identify any areas that may need improvement. You could even work with a free SCORE mentor on your business plan or use a SCORE business plan template for more detailed guidance.

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The takeaway

Writing a business plan is an essential process for any forward-thinking entrepreneur or business owner. A business plan requires a lot of up-front research, planning, and attention to detail, but it’s worthwhile. Creating a comprehensive business plan can help you achieve your business goals and secure the funding you need.

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How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

Ask for Help

When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business. 

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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Free Business Plan Template for Small Businesses (2024)

Use this free business plan template to write your business plan quickly and efficiently.

A good business plan is essential to successfully starting your business —  and the easiest way to simplify the work of writing a business plan is to start with a business plan template.

You’re already investing time and energy in refining your business model and planning your launch—there’s no need to reinvent the wheel when it comes to writing a business plan. Instead, to help build a complete and effective plan, lean on time-tested structures created by other  entrepreneurs and startups. 

Ahead, learn what it takes to create a solid business plan and download Shopify's free business plan template to get started on your dream today. 

What this free business plan template includes

• Executive summary
• Company overview
• Products or services offered
• Market analysis
• Marketing plan
• Logistics and operations plan
• Financial plan

This business plan outline is designed to ensure you’re thinking through all of the important facets of starting a new business. It’s intended to help new business owners and entrepreneurs consider the full scope of running a business and identify functional areas they may not have considered or where they may need to level up their skills as they grow.

That said, it may not include the specific details or structure preferred by a potential investor or lender. If your goal with a business plan is to secure funding , check with your target organizations—typically banks or investors—to see if they have business plan templates you can follow to maximize your chances of success.

Our free business plan template includes seven key elements typically found in the traditional business plan format:

1. Executive summary

This is a one-page summary of your whole plan, typically written after the rest of the plan is completed. The description section of your executive summary will also cover your management team, business objectives and strategy, and other background information about the brand. 

2. Company overview

This section of your business plan will answer two fundamental questions: “Who are you?” and “What do you plan to do?” Answering these questions clarifies why your company exists, what sets it apart from others, and why it’s a good investment opportunity. This section will detail the reasons for your business’s existence, its goals, and its guiding principles.

3. Products or services offered

What you sell and the most important features of your products or services. It also includes any plans for intellectual property, like patent filings or copyright. If you do market research for new product lines, it will show up in this section of your business plan.

4. Market analysis

This section includes everything from estimated market size to your target markets and competitive advantage. It’ll include a competitive analysis of your industry to address competitors’ strengths and weaknesses. Market research is an important part of ensuring you have a viable idea.

5. Marketing plan

How you intend to get the word out about your business, and what strategic decisions you’ve made about things like your pricing strategy. It also covers potential customers’ demographics, your sales plan, and your metrics and milestones for success.

6. Logistics and operations plan

Everything that needs to happen to turn your raw materials into products and get them into the hands of your customers.

7. Financial plan

It’s important to include a look at your financial projections, including both revenue and expense projections. This section includes templates for three key financial statements: an income statement, a balance sheet, and a cash-flow statement . You can also include whether or not you need a business loan and how much you’ll need.

Business plan examples

What do financial projections look like on paper? How do you write an executive summary? What should your company description include?  Business plan examples  can help answer some of these questions and transform your business idea into an actionable plan.

Professional business plan example

Inside our template, we’ve filled out a sample business plan featuring a fictional ecommerce business . 

The sample is set up to help you get a sense of each section and understand how they apply to the planning and evaluation stages of a business plan. If you’re looking for funding, this example won’t be a complete or formal look at business plans, but it will give you a great place to start and notes about where to expand.

Lean business plan example

A lean business plan format is a shortened version of your more detailed business plan. It’s helpful when modifying your plan for a specific audience, like investors or new hires. 

Also known as a one-page business plan, it includes only the most important, need-to-know information, such as:

• Company description
• Key members of your team
• Customer segments

💡 Tip: For a step-by-step guide to creating a lean business plan (including a sample business plan), read our guide on how to create a lean business plan .

Benefits of writing a solid business plan

It’s tempting to dive right into execution when you’re excited about a new business or side project, but taking the time to write a thorough business plan and get your thoughts on paper allows you to do a number of beneficial things:

• Test the viability of your business idea. Whether you’ve got one business idea or many, business plans can make an idea more tangible, helping you see if it’s truly viable and ensure you’ve found a target market. 
• Plan for your next phase. Whether your goal is to start a new business or scale an existing business to the next level, a business plan can help you understand what needs to happen and identify gaps to address.
• Clarify marketing strategy, goals, and tactics. Writing a business plan can show you the actionable next steps to take on a big, abstract idea. It can also help you narrow your strategy and identify clear-cut tactics that will support it.
• Scope the necessary work. Without a concrete plan, cost overruns and delays are all but certain. A business plan can help you see the full scope of work to be done and adjust your investment of time and money accordingly.
• Hire and build partnerships. When you need buy-in from potential employees and business partners, especially in the early stages of your business, a clearly written business plan is one of the best tools at your disposal. A business plan provides a refined look at your goals for the business, letting partners judge for themselves whether or not they agree with your vision.
• Secure funds. Seeking financing for your business—whether from venture capital, financial institutions, or Shopify Capital —is one of the most common reasons to create a business plan.

Why you should you use a template for a business plan

A business plan can be as informal or formal as your situation calls for, but even if you’re a fan of the back-of-the-napkin approach to planning, there are some key benefits to starting your plan from an existing outline or simple business plan template.

No blank-page paralysis

A blank page can be intimidating to even the most seasoned writers. Using an established business planning process and template can help you get past the inertia of starting your business plan, and it allows you to skip the work of building an outline from scratch. You can always adjust a template to suit your needs.

Guidance on what to include in each section

If you’ve never sat through a business class, you might never have created a SWOT analysis or financial projections. Templates that offer guidance—in plain language—about how to fill in each section can help you navigate sometimes-daunting business jargon and create a complete and effective plan.

Knowing you’ve considered every section

In some cases, you may not need to complete every section of a startup business plan template, but its initial structure shows you you’re choosing to omit a section as opposed to forgetting to include it in the first place.

Tips for creating a successful business plan

There are some high-level strategic guidelines beyond the advice included in this free business plan template that can help you write an effective, complete plan while minimizing busywork.

Understand the audience for your plan

If you’re writing a business plan for yourself in order to get clarity on your ideas and your industry as a whole, you may not need to include the same level of detail or polish you would with a business plan you want to send to potential investors. Knowing who will read your plan will help you decide how much time to spend on it.

Know your goals

Understanding the goals of your plan can help you set the right scope. If your goal is to use the plan as a roadmap for growth, you may invest more time in it than if your goal is to understand the competitive landscape of a new industry.

Take it step by step

Writing a 10- to 15-page document can feel daunting, so try to tackle one section at a time. Select a couple of sections you feel most confident writing and start there—you can start on the next few sections once those are complete. Jot down bullet-point notes in each section before you start writing to organize your thoughts and streamline the writing process.

Maximize your business planning efforts

Planning is key to the financial success of any type of business , whether you’re a startup, non-profit, or corporation.

To make sure your efforts are focused on the highest-value parts of your own business planning, like clarifying your goals, setting a strategy, and understanding the target market and competitive landscape, lean on a business plan outline to handle the structure and format for you. Even if you eventually omit sections, you’ll save yourself time and energy by starting with a framework already in place.

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Business plan template FAQ

What is the purpose of a business plan.

The purpose of your business plan is to describe a new business opportunity or an existing one. It clarifies the business strategy, marketing plan, financial forecasts, potential providers, and more information about the company.

How do I write a simple business plan?

• Choose a business plan format, such as a traditional or a one-page business plan. 
• Find a business plan template.
• Read through a business plan sample.
• Fill in the sections of your business plan.

What is the best business plan template?

If you need help writing a business plan, Shopify’s template is one of the most beginner-friendly options you’ll find. It’s comprehensive, well-written, and helps you fill out every section.

What are the 5 essential parts of a business plan?

The five essential parts of a traditional business plan include:

• Executive summary: This is a brief overview of the business plan, summarizing the key points and highlighting the main points of the plan.
• Business description: This section outlines the business concept and how it will be executed.
• Market analysis: This section provides an in-depth look at the target market and how the business will compete in the marketplace.
• Financial plan: This section details the financial projections for the business, including sales forecasts, capital requirements, and a break-even analysis.
• Management and organization: This section describes the management team and the organizational structure of the business.

Are there any free business plan templates?

There are several free templates for business plans for small business owners available online, including Shopify’s own version. Download a copy for your business.

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The 7 Best Business Plan Examples (2024)

As an aspiring entrepreneur gearing up to start your own business , you likely know the importance of drafting a business plan. However, you might not be entirely sure where to begin or what specific details to include. That’s where examining business plan examples can be beneficial. Sample business plans serve as real-world templates to help you craft your own plan with confidence. They also provide insight into the key sections that make up a business plan, as well as demonstrate how to structure and present your ideas effectively.

Example business plan

To understand how to write a business plan, let’s study an example structured using a seven-part template. Here’s a quick overview of those parts:

• Executive summary: A quick overview of your business and the contents of your business plan.
• Company description: More info about your company, its goals and mission, and why you started it in the first place.
• Market analysis: Research about the market and industry your business will operate in, including a competitive analysis about the companies you’ll be up against.
• Products and services: A detailed description of what you’ll be selling to your customers.
• Marketing plan: A strategic outline of how you plan to market and promote your business before, during, and after your company launches into the market.
• Logistics and operations plan: An explanation of the systems, processes, and tools that are needed to run your business in the background.
• Financial plan: A map of your short-term (and even long-term) financial goals and the costs to run the business. If you’re looking for funding, this is the place to discuss your request and needs.

7 business plan examples (section by section)

In this section, you’ll find hypothetical and real-world examples of each aspect of a business plan to show you how the whole thing comes together. 

• Executive summary

Your executive summary offers a high-level overview of the rest of your business plan. You’ll want to include a brief description of your company, market research, competitor analysis, and financial information. 

In this free business plan template, the executive summary is three paragraphs and occupies nearly half the page:

• Company description

You might go more in-depth with your company description and include the following sections:

• Nature of the business. Mention the general category of business you fall under. Are you a manufacturer, wholesaler, or retailer of your products?
• Background information. Talk about your past experiences and skills, and how you’ve combined them to fill in the market. 
• Business structure. This section outlines how you registered your company —as a corporation, sole proprietorship, LLC, or other business type.
• Industry. Which business sector do you operate in? The answer might be technology, merchandising, or another industry.
• Team. Whether you’re the sole full-time employee of your business or you have contractors to support your daily workflow, this is your chance to put them under the spotlight.

You can also repurpose your company description elsewhere, like on your About page, Instagram page, or other properties that ask for a boilerplate description of your business. Hair extensions brand Luxy Hair has a blurb on it’s About page that could easily be repurposed as a company description for its business plan. 

• Market analysis

Market analysis comprises research on product supply and demand, your target market, the competitive landscape, and industry trends. You might do a SWOT analysis to learn where you stand and identify market gaps that you could exploit to establish your footing. Here’s an example of a SWOT analysis for a hypothetical ecommerce business: 

You’ll also want to run a competitive analysis as part of the market analysis component of your business plan. This will show you who you’re up against and give you ideas on how to gain an edge over the competition. 

• Products and services

This part of your business plan describes your product or service, how it will be priced, and the ways it will compete against similar offerings in the market. Don’t go into too much detail here—a few lines are enough to introduce your item to the reader.

• Marketing plan

Potential investors will want to know how you’ll get the word out about your business. So it’s essential to build a marketing plan that highlights the promotion and customer acquisition strategies you’re planning to adopt. 

Most marketing plans focus on the four Ps: product, price, place, and promotion. However, it’s easier when you break it down by the different marketing channels . Mention how you intend to promote your business using blogs, email, social media, and word-of-mouth marketing. 

Here’s an example of a hypothetical marketing plan for a real estate website:

Logistics and operations

This section of your business plan provides information about your production, facilities, equipment, shipping and fulfillment, and inventory.

Financial plan

The financial plan (a.k.a. financial statement) offers a breakdown of your sales, revenue, expenses, profit, and other financial metrics. You’ll want to include all the numbers and concrete data to project your current and projected financial state.

In this business plan example, the financial statement for ecommerce brand Nature’s Candy includes forecasted revenue, expenses, and net profit in graphs.

It then goes deeper into the financials, citing:

• Funding needs
• Project cash-flow statement
• Project profit-and-loss statement
• Projected balance sheet

You can use Shopify’s financial plan template to create your own income statement, cash-flow statement, and balance sheet. 

Types of business plans (and what to write for each)

A one-page business plan is a pared down version of a standard business plan that’s easy for potential investors and partners to understand. You’ll want to include all of these sections, but make sure they’re abbreviated and summarized:

• Logistics and operations plan
• Financials 

A startup business plan is meant to secure outside funding for a new business. Typically, there’s a big focus on the financials, as well as other sections that help determine the viability of your business idea—market analysis, for example. Shopify has a great business plan template for startups that include all the below points:

• Market research: in depth
• Financials: in depth

Your internal business plan acts as the enforcer of your company’s vision. It reminds your team of the long-term objective and keeps them strategically aligned toward the same goal. Be sure to include:

• Market research

Feasibility 

A feasibility business plan is essentially a feasibility study that helps you evaluate whether your product or idea is worthy of a full business plan. Include the following sections:

A strategic (or growth) business plan lays out your long-term vision and goals. This means your predictions stretch further into the future, and you aim for greater growth and revenue. While crafting this document, you use all the parts of a usual business plan but add more to each one:

• Products and services: for launch and expansion
• Market analysis: detailed analysis
• Marketing plan: detailed strategy
• Logistics and operations plan: detailed plan
• Financials: detailed projections

Free business plan templates

Now that you’re familiar with what’s included and how to format a business plan, let’s go over a few templates you can fill out or draw inspiration from.

Bplans’ free business plan template

Bplans’ free business plan template focuses a lot on the financial side of running a business. It has many pages just for your financial plan and statements. Once you fill it out, you’ll see exactly where your business stands financially and what you need to do to keep it on track or make it better.

PandaDoc’s free business plan template

PandaDoc’s free business plan template is detailed and guides you through every section, so you don’t have to figure everything out on your own. Filling it out, you’ll grasp the ins and outs of your business and how each part fits together. It’s also handy because it connects to PandaDoc’s e-signature for easy signing, ideal for businesses with partners or a board.

Miro’s Business Model Canvas Template

Miro’s Business Model Canvas Template helps you map out the essentials of your business, like partnerships, core activities, and what makes you different. It’s a collaborative tool for you and your team to learn how everything in your business is linked.

Better business planning equals better business outcomes

Building a business plan is key to establishing a clear direction and strategy for your venture. With a solid plan in hand, you’ll know what steps to take for achieving each of your business goals. Kickstart your business planning and set yourself up for success with a defined roadmap—utilizing the sample business plans above to inform your approach.

Business plan FAQ

What are the 3 main points of a business plan.

• Concept. Explain what your business does and the main idea behind it. This is where you tell people what you plan to achieve with your business.
• Contents. Explain what you’re selling or offering. Point out who you’re selling to and who else is selling something similar. This part concerns your products or services, who will buy them, and who you’re up against.
• Cash flow. Explain how money will move in and out of your business. Discuss the money you need to start and keep the business going, the costs of running your business, and how much money you expect to make.

How do I write a simple business plan?

To create a simple business plan, start with an executive summary that details your business vision and objectives. Follow this with a concise description of your company’s structure, your market analysis, and information about your products or services. Conclude your plan with financial projections that outline your expected revenue, expenses, and profitability.

What is the best format to write a business plan?

The optimal format for a business plan arranges your plan in a clear and structured way, helping potential investors get a quick grasp of what your business is about and what you aim to achieve. Always start with a summary of your plan and finish with the financial details or any extra information at the end.

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Best small business loans in June 2024

• • Personal finance
• • Mortgages

Allison Martin is a contributor to Bankrate covering personal finance, including mortgages, auto loans and small business loans. Martin’s work began over 10 years ago as a digital content strategist, and she’s since been published in several leading outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews, Investopedia, Experian and Credit.com. Martin, a Certified Financial Education Instructor (CFE), also shares her passion for financial literacy and entrepreneurship with others through interactive workshops and programs.

• • Personal loans
• • Auto loans

Pippin Wilbers is a Bankrate editor specializing in personal and auto loans. Pippin is passionate about demystifying complex topics, such as car financing, and helping borrowers stay up-to-date in a changing and challenging borrower environment.

Kenneth Chavis IV is a senior wealth counselor at Versant Capital Management who provides investment management, complex wealth strategy, financial planning and tax advice to business owners, executives, medical doctors, and more.

A small business loan can help cover a variety of business-related expenses, including startup costs, working capital or growth opportunities. But securing financing isn’t always easy — you’ll need to identify the right type of small business loan or line of credit for your company and find a lender willing to work with you.

Below you will find a list of the best small business loans on the market, details about each offering and an explanation of why they made the cut. Our top selections for the best small business loans include lenders who will offer the best interest rates to business owners with great credit along with lenders willing to help startups and business owners with bad credit.

How to apply for a business loan

Applying for a business loan is less intimidating when you break it into steps.

Figure out how much you need.

Look into your business and personal credit scores., start prequalifying., compare rates among different lenders., gather your documentation and apply for the loan..

Once you determine which lender has the best rates, you can fully apply. You may need to submit paperwork like tax returns, bank statements showing how much revenue your small business generates, or other personal information. Work closely with the lender to determine the documents it needs .

How to choose the best lender

There are many lending options. To choose the best small business lender :

Determine if you meet the lender’s eligibility criteria.

Narrow your list., get prequalified., compare loan offers., on this page, the bankrate promise.

The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where and in what order products appear. This table does not include all companies or all available products. Bankrate does not endorse or recommend any companies.

Filter results

Best for working capital.

Bankrate Rating = 4.6 /5 Bankrate scores are objectively determined by our editorial team. Our scoring formula weighs several factors consumers should consider when choosing financial products and services.

Interest will typically be quoted as an annual percentage rate (APR), which reflects interest rate and any other charges and fees you may have to pay.

on BusinessLoans.com

Marketing Bullets:

• Full financing application takes just ~10 minutes
• Enjoy some of the most competitive pricing in the alternative lending space
• Factor rates* as low as 1.11
• Daily, weekly, and monthly** payment and remittance options
• Approvals as fast as 4 hours

Disclosures:

*Factor rates are included in your daily estimate to simplify remittances and account monitoring. Best factor rates available to merchants with excellent credit and financial strength.

**Some products are made available through Credibly’s network of external funding partners

Pros and cons

• Potential early repayment discount
• Prequalify in as little as 10 minutes
• Funds in as little as one day
• Unavailable in 13 states
• High minimum revenue requirement
• High minimum borrowing amount

Additional requirements

WHAT TO KNOW

For Credibly’s working capital loan, your business needs at least $25,000 in average monthly deposits for the last three months. Applicants must total at least a 51% stake in the business. Payments can be made daily or weekly. Credibly charges a 2.5% origination fee.

This loan is unavailable in the following states: CO, DE, GA, Ml, MT, NV, NJ, ND, OK, OR, SD, TX and VT.

There are four companies that assess business credit scores: Dunn & Bradstreet (D&B), Experian, Equifax and FICO. Each calculates their own scores based on various scales. D&B and Experian rank on a 1-100 scale. FICO scores on a 0-300 scale. Equifax generates 3 separate scores based on business payment index (1-100), business credit risk (101-992), and business failure (1,000 - 1,880).

A FICO score/credit score is used to represent the creditworthiness of a person and may be one indicator of the loans you are eligible for. However, credit score alone does not guarantee or imply approval for any financial product.

This is a form of protection for lenders requiring the borrower to repay the loan from their personal assets if the business defaults. A personal guarantee can help some businesses access credit that typically wouldn't qualify.

Best for short-term loans

Funding Circle

• No prepayment penalty
• Once low-monthly payments*
• Term lengths up to 7 years*
• Fixed rates for the length of the loan
• Dedicated US based Funding Specialist

*Rates, terms and maximum loan amount may vary according to the overall creditworthiness of the applicant and financing product selected. To see what your business may qualify for, apply today at no obligation. Approval and funding times may vary by lending partner and financing product selected. All loan offers and qualifications require credit approval and are subject to change with or without notice.

• Flexible repayment terms
• Low revenue requirements
• Can help you build business credit
• Requires two years in business
• No unsecured loan option
• High origination fee

Applicants must be able to offer collateral such as liens on equipment, vehicles or inventory. All owners with a 20% stake or more must be on the loan, and signatories must add up to at least 51% ownership. Signatories must have no personal bankruptcies in the past seven years.

Funding Circle charges an origination fee of 4.49% to 10.49%. It also charges a late fee of up to 5%.

BEST FOR WORKING CAPITAL

• Same-day funding
• Early repayment incentives
• Helps build business credit
• Loan origination and maintenance fees
• Requires personal guarantees

 You can apply for a loan with OnDeck online or by phone at 888-269-4246. Most applicants receive a decision in minutes, and funds are available as soon as the same business day or within one to three days. OnDeck charges a loan origination fee of up to 4 percent. There is a $20 monthly maintenance fee for the business line of credit unless you borrow $5,000 within the first week of opening it. Both products require personal guarantees. 

Funding isn’t available in the following states: NV, ND and SD.

Best for early payoff discount

National Funding

Bankrate Rating = 4.4 /5 Bankrate scores are objectively determined by our editorial team. Our scoring formula weighs several factors consumers should consider when choosing financial products and services.

on partner site

• Hire new employees to support your business growth
• Flexible payment options are available
• Stock more best-selling items during your busy selling seasons
• Maintain daily operations even through gaps in cash flow
• Continue running your business seamlessly during seasonal lulls

This is not a guaranteed offer of credit. Rates and terms for business credit products are subject to underwriting guidelines, may be provided by third parties, and are subject to lender approval. Approved funding amount is based on eligibility. Actual eligibility may vary. Restrictions may apply. Application is subject to approval by the lender and is based on factors such as business type, time in business, annual sales, average business bank account balances, personal credit and other variables deemed relevant by the lender. Products offered by National Funding, LLC and affiliates are business products only. In California, products are made or arranged pursuant to a California Financing Law License. License number: 603A169.

• Access to high loan amounts
• Offers early payoff discounts
• Funding specialists available to help
• Limited information on website
• High minimum annual revenue
• No monthly payment option

You can apply online or by phone. National Funding will connect you with a funding specialist to make sure you are getting the financing options that work best for you. National Funding charges an origination fee of between 1 and 5 percent and requires a personal guarantee.

National Funding operates in all states.

Best for startups

Bankrate Rating = 4.5 /5 Bankrate scores are objectively determined by our editorial team. Our scoring formula weighs several factors consumers should consider when choosing financial products and services.

• Fast funds accessible by app
• Unsecured option
• Wide range of loan amounts
• Min. annual revenue may be prohibitive
• Short repayment terms
• Weekly fee makes rate comparison hard

Fundbox is available in all 50 states and multiple territories. Its loans require a personal guarantee from business owners with at least a 25 percent stake. In addition to the weekly fees, Fundbox charges a $6 non-sufficient funds fee. Payments are made weekly.

Best for line of credit

American Express Business Blueprint™

Bankrate Rating = 4.3 /5 Bankrate scores are objectively determined by our editorial team. Our scoring formula weighs several factors consumers should consider when choosing financial products and services.

• Apply online in a few simple steps 
• Pay no fees if there is no outstanding balance
• Pay a monthly fee each month you have an outstanding balance 
• Digital application and onboarding journey; applications are not accepted by phone 
• Customers can apply 24/7 and access their account information 24/7 
• Total monthly fees incurred over the loan term range are: 3-9% for 6-month loans, 6-18% for 12-month loans, 9-27% for 18-month loans, and 12-18% for 24-month loans
• The required FICO score may be higher based on your relationship with American Express
• All businesses are unique and are subject to review and approval
• Fair monthly average revenue requirement
• No origination or early repayment fees
• Available across the U.S.
• Only available to established businesses
• High borrowing costs for longer terms
• Fees make cost comparisons hard
• Business credit score: N/A
• Personal credit score: Minimum FICO score of at least 660* at the time of application
• Personal guarantee requirement: Yes
• Minimum time in business requirement:  Must have started your business at least a year ago
• Minimum business monthly revenue:  Average monthly revenue of at least $3,000

* All businesses are unique and are subject to approval and review.

Best for the bank experience

Bank of America Business

on Bankrate

• Free business credit score monitoring
• No collateral needed
• Bank customers can apply online
• Need two years in business
• $150 origination fee
• High credit score requirement

You can apply online if you have a Bank of America Online Banking ID. Otherwise, you can make an appointment by calling or using the online scheduler to connect with a business lending specialist.

Applicants must be at least 18 years old and a U.S. citizen or resident alien. Loans are available in all 50 states and Washington, D.C. 

There is a $150 origination fee.

Bankrate 2024 Awards Winner: Best small business loan for good-to-excellent credit

Wells Fargo Business

Bankrate Rating = 4.2 /5 Bankrate scores are objectively determined by our editorial team. Our scoring formula weighs several factors consumers should consider when choosing financial products and services.

• Competitive rates
• Rewards program
• Multiple lines of credit
• High credit score requirements
• Personal guarantee or collateral required
• Annual fee for some products

 To apply for the Wells Fargo BusinessLine® line of Credit or Wells Fargo Small Business Advantage line of credit, you can go online or visit a branch. To apply for the Wells Fargo Prime Line of Credit, call 1-844-807-5060. The BusinessLine® line of credit and Small Business Advantage® line of credit require a personal guarantee for all owners over 25 percent and 20 percent, respectively. The Prime Line of Credit requires collateral. The BusinessLine® line of credit also comes with an annual fee after the first year.

Bankrate 2024 Awards Winner: Best CDFI for small business loans

Accion Opportunity Fund

• Low interest rates
• Helps minority businesses
• Mentoring and educational support
• Only offers a term loan
• Low maximum loan amount

You can apply online or call 1-866-458-3555 to speak with a representative. Accion Opportunity Fund checks your personal credit with a soft pull so that it won’t affect your credit score. Accion reviews other factors besides credit scores to make funding decisions, though it’s unclear what it considers. 

The loan is unavailable in the following states: MT, ND, SD, TN and VT.

On This Page

• Compare business loans
• Top business loans
• What is a business loan?
• Types of business loans
• Pros and cons of business loans

Alternatives to small business loans

Where to get a small business loan, how to manage a business loan, small business loan news.

• Frequently asked questions
• Methodology

Compare the best small business loans in June 2024

If you’re on the hunt for a business loan, take a deeper dive into our top picks. The table below offers more details about minimum credit score requirements, loan amounts and time in business for some of the best small business loans.

A closer look at our top small business loans

When you’re comparing business loans, it’s important to take multiple factors into consideration. Do you meet the minimum requirements? Is this loan designed for your needs? Decide which features of a loan are most important for your business, such as flexible terms or startup support, and then take a closer look at the lenders we mentioned in the table above.

SBG Funding: Best for high loan amounts

Overview: SBG Funding is an online lender with an array of business loan options, from term loans to equipment financing and leasing to SBA 7(a) loans. They also offer invoice financing, allowing you to get an advance of up to 90 percent of your outstanding invoice amounts. Term loans and merchant cash advances are available up to $5 million, bridge loans up to $1 million in financing and SBA 7(a) loans up to $10 million. A spokesperson also stated their business line of credit goes up to $500,000. 

Who it's for

SBG Funding works well for established businesses with fair to excellent credit and at least $400,000 in annual revenue. Its minimum credit requirement is a 600 personal credit score, lower than many traditional lenders. SBG Funding claims that it has an 85 percent approval rate, which gives you a high chance of getting approved for funding. 

Standout features

• Founded in 2017
• Fair credit accepted
• High loan limits
• Low simple interest rate
• Variety of products

National Funding: Best for early payoff discounts

Overview: National Funding works with hundreds of industries and communities. The lender’s business loans include working capital loans, short-term business loans, equipment financing and leasing. National Funding’s working capital loans offer a 7 percent discount on loan fees if you repay within 100 days of taking out the loan. Its loans range from $10,000 to $500,000, with repayment terms from four to 18 months.

Any business ready to get and pay off a loan in less than four months will benefit the most from National Funding’s working capital loan. You can also get funding within 24 hours, helping you finance your next project quickly. You will also need to sign a personal guarantee backing the loan with your personal assets, which is a common requirement. 

• Established in 1999
• Early payoff discount
• No collateral required
• Fast funding
• Variety of loans available

Funding Circle: Best for flexible repayment terms

Overview: Funding Circle helps small businesses find conventional business loans online. It’s helped 143,000 small businesses receive term loans and lines of credit, usually funding within 48 hours. Unlike other online lenders, Funding Circle offers short and long-term repayment options. The term lengths for their business term loans range from six months to seven years, allowing businesses to tailor funding and repayment terms to their budget.

Funding Circle works well for established, low-revenue businesses with fair credit. It accepts businesses with a minimal $50,000 per year in revenue and two years in business. But you’ll need a fair personal credit score of at least 660 to be accepted by this lender.

• Launched in 2010
• Online preapproval
• Fast funding time
• Minimal fees
• Low revenue requirement

Fundbox: Best for startups

Overview: Fundbox provides working capital loans for small businesses in the form of unsecured lines of credit . Its credit limits range from $1,000 to $150,000. The company doesn’t use traditional interest rates, instead relying on an amortized weekly fee. Fundbox has a simplified online application, and business owners could be approved in as little as three minutes. Borrowers can use its online calculator to input their desired loan amount and chosen repayment term to see the total borrowing costs. 

Fundbox works best for new businesses needing short-term infusions of cash to maintain a healthy flow of capital. You just need six months in business and $100,000 in annual revenue. The ideal Fundbox borrower is prepared to pay off their loan quickly, as the term choices are either 12 weeks or 24 weeks. You also need a business checking account with three months’ worth of active transactions to qualify.

• Founded in 2013
• Next-day funding
• No prepayment penalties
• Flexible credit requirements
• App available 

American Express® Business Line of Credit: Best for low revenue requirements

Overview: American Express® Business Line of Credit offers credit from $2,000 to $250,000 with terms ranging from six, 12, 18 and 24 months. The minimum draw amount is $500 for six-month loan terms if your balance is greater than $500 or $100 if your balance is less than or equal to $500. For 12- and 18-month loan terms, the minimum draw amount is $10,000. Instead of interest, borrowers are assessed a percentage fee each month they have an outstanding balance. The fee ranges from 3.00% to 9.00% on six-month terms, 6.00% to 18.00% on 12-month terms, 9.00% to 27.00% on 18-month terms and 12.00% to 18.00% for 24-month terms.

* All businesses are unique and are subject to approval and review. The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.

This loan may suit smaller and young businesses with a minimum FICO credit score of at least 660* that need access to a generous cash flow as they grow their operations. It doesn't require extensive business experience or a hefty revenue to access the line of credit. This loan is also good for business owners who prefer an online application process and are looking for a variety of terms.

• Automated online process
• Low minimum draws
• Generous revenue requirement
• Trusted brand

Credibly: Best for bad credit

Overview: Credibly is a direct lender of working capital loans and cash advances to small businesses needing fast funding. It also partners with other lenders to offer business lines of credit, long-term loans, equipment financing, SBA loans and invoice factoring. It’s often easier for business owners with poor or bad credit to qualify with Credibly than it would be at a traditional bank. As an online lender, Credibly is known for being flexible with its lending requirements, so business owners with a minimum personal credit score of 550 could qualify for funding.

Credibly best fits businesses with challenged credit but a healthy annual revenue of at least $180,000. When assessing your revenue, Credibly’s website states that it accepts a three-month average revenue of $15,000 per month. There’s also no need to provide a personal guarantee, backing the loan with personal assets.

• Established in 2010
• Accepts bad credit
• 24-hour funding
• Loans up to $10 million
• Variety of loan options

OnDeck: Best for working capital

Overview: OnDeck is an online lender specializing in small business loans. Its products include term loans and business lines of credit, which are available in 47 states. Flexible lending requirements and fast funding make OnDeck an appealing option for businesses needing working capital. If approved, businesses can get between $5,000 and $250,000 to use for various business purposes. 

OnDeck is a great choice for fair-credit businesses needing quick access to capital. The lender limits its loans to certain industries, but qualifying businesses may get funds the same day they apply. 

• Founded in 2006
• Potential for same-day or instant funding
• Relaxed credit requirements
• Early repayment incentive

Bank of America: Best for the bank experience

Overview: Bank of America is one of the nation's largest originators of commercial loans. Its large bank network sprawls across 38 U.S. states, and the brand serves customers in all 50 states. You can get face-to-face help from a representative to guide you through the business loan process. Plus, you can apply for its unsecured Business Advantage term loan online (so long as you have an online banking ID with the bank) by phone or in person, making it a convenient option among bank loans. The bank offers many business loan products, from term loans and lines of credit to equipment and SBA loans.

Like most banks, Bank of America’s loans are best suited for businesses with strong credit. It typically requires a personal credit score of 700 or higher and at least $100,000 in annual revenue to be eligible. Most loans also require you to have an established business with at least two years of experience. Its cash-secured line of credit does accept less time in business and lower annual revenue. Business owners who like to get in-person assistance will prefer this experience over an online bank.

• More than 3,800 branches
• Loans up to $5 million

Wells Fargo: Best small business line of credit 

Overview: Wells Fargo is a well-known financial institution that operates nationwide It offers a wide range of products, including secured and unsecured small business lines of credit and SBA loans. Wells Fargo offers multiple lines of credit to qualifying businesses. Credit lines range from $5,000 to $1 million and come with a revolving or five-year term. In addition to its competitive rates, which range from a 9.00 percent to 18.25 percent APR, businesses with an unsecured line of credit have access to Wells Fargo's rewards program.

Wells Fargo business lines of credit are suitable for businesses at all stages. While startups with less than two years of history can potentially get approved for a business line of credit, established businesses will likely have better luck getting approved. Lines of credit are ideal for customers who need ongoing financing as opposed to a one-time lump sum payment.

• Multiple options for lines of credit
• More than 5,600 branches

Accion Opportunity Fund: Best for underserved communities 

Overview: Accion Opportunity Fund is a nonprofit dedicated to serving underserved communities. It provides access to capital and financial resources to empower and help entrepreneurs, particularly those with limited resources and access to funding, to achieve their business aspirations. Accion Opportunity's working capital and equipment loans are designed to eliminate the barrier of strict lending requirements often imposed by traditional banks and provide easy access to funding to help small businesses succeed. 

Women, people of color and other underserved communities unable to get access to funding through a traditional lender may find Accion Opportunity is a good fit for their business needs. To be eligible, you need to generate at least $50,000 annually, own 20 percent or more of the business and have been operating for at least 12 months. Basic requirements aside, this lender is known for assessing a variety of financial factors rather than basing its decision solely on a business's credit score.

• Terms up to 60 months
• Focus on underserved communities

What is a small business loan?

A small business loan is a loan product used by business owners looking to open the doors to their new business, expand operations, acquire inventory or equipment, resolve cash flow issues or use for other business-related needs. These loans are available through traditional banks, credit unions and online lenders.

How does a small business loan work?

Small business loans work much like any other loan type: You apply, the lender approves you and then you receive it, use it and pay it back. Lenders set minimum requirements that must be met, like a certain time in business, credit score or annual revenue. Unlike a personal loan, you often have to prove your business is viable by providing business bank account information and other data.

If a lender approves you for a loan, you can negotiate the details and then you'll receive a loan agreement to sign . With some lenders, this process might take a few days; with others, several weeks. Depending on the loan type, you might have a revolving amount you can borrow from, or cash may come in one lump sum. 

After receiving the funds, you must start repaying them. You may do that in equal payments over a given term at regular intervals. Monthly payments are common, though anything from daily to quarterly payments is possible. Or you might repay your loan through a percentage of your daily or weekly sales, a model that’s common with merchant cash advances.

Secured vs. unsecured business loans

You also get to choose between a secured or unsecured business loan , depending on whether you have collateral to put up for the loan. A secured business loan uses your business assets as a guarantee that you can repay the loan. Using collateral is beneficial if you need help getting approved for a bad credit loan or if you’re vying for lower interest rates. 

But if you’re short on assets or don’t want to risk backing a loan with them, you could go with an unsecured loan. An unsecured loan lets you borrow funds without putting any collateral behind the money borrowed. Be aware that lenders may require you to have a top-notch credit history or well-built stream of revenue to qualify for an unsecured loan.  

Requirements for small business loans

Each lender has its own set of eligibility criteria for small business loans. That said, you’ll want to keep some general guidelines in mind as you research your options and prepare to apply for a business loan. Most lenders will typically evaluate the following to determine if you’re a good fit for a small business loan: 

• Business revenue: You’ll likely need to generate a certain amount of gross annual or monthly revenue to qualify for a small business loan. Meeting this requirement demonstrates to the lender that you have the means to make monthly loan payments without disrupting your company’s cash flow.
• Business credit history: Some lenders will check your business credit score when evaluating your loan application. Your business credit history will also show the lender your payment history with vendors and service providers.
• Personal finances: Most small business lenders will check your personal credit score and history to determine the risk you pose. Some lenders may offer business loans for a credit score of 500 or less , but they may come with high interest and fees. A higher credit score means you’ll have better approval odds and lower interest rates with more lenders. 
• Time in business: Expect to provide the number of months or years you’ve been in business. In most instances, you’ll need at least six months of business to qualify for funding. Some traditional lenders require at least two years of business experience to secure a small business loan. But startup loans exist, too.
• Industry: Lenders want to know you’re operating in a stable industry or one that isn’t at risk for a major downturn that could significantly affect operations and your ability to repay the loan.
• Business debts: Prepare to provide a business debt schedule , which lists your current outstanding business debt obligations and monthly payments to the lender. This information will be used to determine how much of your revenue is allocated to current debts and if you can afford to take on a new monthly loan payment. 

It’s also helpful to have these documents handy when you apply: 

Commonly required documents

• Business plan and loan proposal (if applicable) 
• Business license and operating agreement 
• Employer identification number ( EIN )
• Recent personal and business tax returns 
• Recent bank statements 
• Proof of business insurance
• Payroll records 
• Lease agreement
• List of accounts payable and accounts receivable 
• Business financial statements (i.e., balance sheet, profit and loss statement)

Types of small business loans

There are several types of small business loans to choose from. Some have more stringent requirements than others, particularly those offered by traditional banks. But online lenders typically have options available for new businesses and business owners with fair or bad credit . 

Here’s a closer look at the different business loan options available.

The most common type of business loan among startups and established companies, term loans let you borrow a lump sum to cover business expenses. Term loans are accessible through most banks and credit unions, and  loan amounts  range from $1,000 to the millions. 

Still, you’ll likely have to generate a sizable amount of revenue and provide a personal guarantee to qualify for funding. Plus, you can expect higher  borrowing costs  if you’re starting out in your business. 

Line of credit

Lines of credit  provide access to a pool of funds you can repeatedly draw from up to your credit limit. While a term loan charges interest on the total borrowed amount the moment you receive funds, with a line of credit, you only  pay interest  on the funds you use. 

There are drawbacks, including the lack of rewards and the limited draw period or time frame that you get to access the line of credit before it closes. The upside is some lenders allow you to make interest-only payments during the draw period, which could be beneficial if you’re trying to get your company’s cash flow back on track.

Equipment financing

Equipment loans let business owners purchase business-related equipment. This can be beneficial if you don’t have the funds available to cover the costs of vital resources to keep your business operating efficiently.

Business owners should consider equipment loans for several reasons. Since the equipment acts as collateral for the loan , interest rates tend to be more favorable compared to unsecured term loans. This also helps to make equipment loans more accessible to business owners with fair or bad credit and new businesses. 

Merchant cash advance

You can access funding to meet your company’s short-term needs with a merchant cash advance . Funds are disbursed in a lump sum and payable to the lender through a percentage of daily credit card sales or bank withdrawals — typically over a short loan term of one year or less. Lenders use your credit card sales volume to determine the amount you’re eligible to borrow, so bad credit isn’t necessarily a deal-breaker. 

Merchant cash advances are a type of bad credit business loan . Instead of interest rates, it charges factor rates , which typically come with faster repayment terms and may even end up costing more than comparable loans that use interest rates. 

Invoice financing and factoring

Both invoice financing and invoice factoring allow you to borrow against your unpaid receivables. They’re both accessible types of business loans, often open to startups and bad-credit borrowers. To get approved for these loans , lenders are more concerned with the creditworthiness and repayment history of your invoiced clients. 

There’s a key difference between the two. Invoice financing involves receiving an advance of up to 85 percent of your company’s accounts receivables, and you’ll repay the client the amount you borrow (plus fees) once the invoice is paid. 

But if you choose invoice factoring , you’ll sell the outstanding invoices directly to the lender in exchange for a lump sum of up to 90 percent of what’s owed. The client will pay the lender directly, and any amount that remains after fees are deducted will be distributed to you. 

Backed by the Small Business Administration, SBA loans are loan products featuring competitive rates and generous loan terms to meet the needs of small business owners. They’re accessible through SBA-approved lenders you can locate through the SBA Lender Match Tool, but they come with a few downsides. 

Despite the SBA’s intention to provide small business owners with the funding they need, SBA loans come with an application process that’s challenging to navigate. Plus, it could be several months before the loan proceeds are disbursed to you. 

For more information on SBA loans, check out the following guides:

• SBA loan denied: What to do next
• Best and worst states for SBA 7(a) loans
• How long do you have to wait for SBA loan approval?

These loans are available as SBA-approved microloans or through non-profits, banks and online lenders offering their own microloan programs. With most microloans, you can access up to $50,000 in working capital or startup funding for your business. 

Some lenders may charge higher borrowing costs than you’d get with standard business term loans, as these loans cater to newer businesses and pose an elevated risk to lenders.

Commercial real estate loan

You can use a commercial real estate loan to purchase or lease a physical space for your company. Some lenders offer up to $5 million in funding with extended repayment periods and competitive interest rates.

Qualifying may be difficult if you’re starting out or your revenue is on the lower end. Plus, you can expect a lengthy application process.

Pros and cons of small business loans

• Attractive interest rates. Bank loans often have lower interest rates than alternative lenders, along with larger loan amounts.
• Longer terms . Installment loans make it possible to pay for an expense over a long period of time. Business loans often extend up to 60 months.
• Flexible use . Most loans let you use the funds for a variety of expenses as long as they directly benefit your business.
• Not ideal for startups . Newer businesses or businesses with poor credit may have limited options.
• Documentation requirements . You’ll need ample financial documentation to show you can repay, which can be challenging for new companies to produce. 
• Lengthy approval timelines . Some lenders or types of loans take weeks to approve due to rigorous underwriting processes.
• Slow funding times . Bank loans aren’t able to compete with the funding times of alternative lenders, which can be as short as just a few hours or the next day.

Business credit cards

Business credit cards may not offer the high maximum rates found with term loans and lines of credit, but they often have perks not found with business loans . This includes discounts on select purchases as well as grace periods and promotional APRs, which can save you from paying interest. You also typically earn points on purchases, which can be redeemed for travel and statement credits. And if you only have fair or good credit, the best business credit cards may offer better rates than the maximum rates found with business loans.

Crowdfunding

Personal loans, small business grants, peer-to-peer lending.

Don’t limit your options — investigate loans from multiple lenders to get the best rates.

Banks and credit unions

Banks and credit unions typically offer a variety of products, from lines of credit to SBA loans. Requirements tend to be strict, however, and approval can sometimes take months. However, these institutions can offer a face-to-face experience. And bank employees should be skilled at helping you navigate the application process.

Online lenders and fintech

Some nonprofits specialize in helping small businesses access capital. Some, such as Kiva , operate crowdfunding platforms. They may also run microloan programs. In general, banks and credit unions are best for more established businesses because of the stricter approval requirements. Online lenders and nonprofits may be more forgiving of less established businesses, as some are even geared toward businesses that could not secure funding from more traditional banking options. 

Community Development Financial Institutions (CDFI)

A business loan from a Community Development Financial Institution (CDFI) offers unique advantages. These institutions are dedicated to supporting underserved communities and promoting economic development, so loans often have more flexible underwriting criteria tailored to meet the needs of small businesses that may face challenges accessing traditional financing. 

Minority Depository Institutions (MDI)

Minority Depository Institutions are financial institutions focused on serving minority communities. Like CDFIs, the goal of MDIs is to provide access to capital and financial services and promote economic development in underserved communities. 

SBA lenders

Banks, credit unions and alternative lenders offer term loans backed by the Small Business Administration (SBA). A business can benefit from an SBA loan due to its favorable terms, lower interest rates, longer repayment periods and flexible eligibility criteria. It provides access to capital for various purposes, such as starting a business, expanding operations, purchasing equipment or refinancing debt and supporting business growth and stability.

Getting approved is just the beginning of your business loan journey. Now you need to follow through with repayments which requires effective planning and money management. While you can use different strategies, one important strategy is to stay close to your business budget . Update your spending and projected revenue frequently so you can make tweaks to accommodate loan payments as your income fluctuates. Consider setting up automatic payments so you don’t miss a loan payment by accident. 

And keep in touch with your lender about your loan status. If you don’t think you can make a payment, communicate that as soon as possible so your lender can work with you on a suitable repayment plan. All in all, be committed to adjusting your business or revenue strategy to fit in loan payments and pay off the entire loan. 

Bankrate Insight

• Fees or other points of the contract are not clearly stated or vague
• Terms to pay back the loan or draw periods are very short
• You cannot pay off the loan early
• Borrowing limits are smaller than what you need
• Lender isn’t forthcoming when answering questions

The foundation of how small business loans work and what’s offered tend to stay the same. But the economy and government regulations can impact interest rates and loan approvals. Here’s what you need to know about getting a business loan in the current market:

• Small Business Saturday: Small Business Saturday is November 30, 2024. Consider supporting your local economy and community by Shopping Small this holiday season. 
• Small business bankruptcies and rising loan balances: Small businesses have been hit hard by the economy and other factors in the last few years, leading some businesses to file bankruptcy . According to the American Bankruptcy Institute , small business Chapter 11 bankruptcies were up 22 percent in January 2024 compared to the same time the previous year. Businesses are also getting less access to credit as business loan interest rates increase and loan demand decreases. According to the Federal Reserve’s Small Business Lending Survey , application approval rates from large and midsized banks declined, rates on new term loans increase, and credit line usage increased by 9 percent.
• Historically high Fed rates create a tight lending environment: The Federal Reserve has been raising lending rates to try to slow inflation since the COVID-19 pandemic into the present. Rates went up in 2022 at a rate not seen since 2001 . In 2023, the Fed has raised the Federal Funds rate a total of 11 times, landing at the current 5.50 percent. The federal funds rate reflects how much it costs for banks to lend money. It also influences benchmark interest rates like the Wall Street Journal prime rate. Many lenders base their interest rates on the prime rate, so other loan rates will also often increase. That includes business loan rates .
• SBA rule changes seek to expand small business financing: As of May 1, 2024, the SBA removed barriers for individuals with past incarceration , excluding those currently incarcerated or with a history of defrauding the government from eligibility. This rule change now allows eligible returning citizens access to SBA loans for starting or expanding a business.

Frequently asked questions about small business loans

How much can you borrow for a startup.

Startups often get approved for amounts between $9,000 to $20,000. You can find loans like SBA loans that offer $50,000 to $5 million. How much you can borrow can depend on the lender and loan type, as well as your business’s features and finances: time in business, annual revenue amounts, credit score and so on. Because startups pose more of a risk to borrowers, their borrowing limits may be lower.

Is it hard to get a small business loan?

It can be  hard to get a small business loan  if you struggle to meet minimum requirements. If you meet the lender's funding requirements, you may be able to avoid difficulties when seeking small business funding. It helps to research borrowers to find possible good fits before formally applying so you’ll know what to expect.

Can you get a small business loan with bad credit?

A good or excellent credit score is ideal when applying for a small business loan to qualify for a competitive interest rate. But some lenders offer funding to bad credit borrowers . Some lenders accept personal credit scores starting at 500, but many lenders require a score in the 600s or higher. Be mindful that a bad credit score means your interest rates will likely be higher.

How much income is needed to get a small business loan?

This varies widely by lender. Many require an annual minimum revenue of $100,000. But you can find lenders that offer loans for businesses with at least $33,000 to $50,000 in revenue. The lender may still be willing to work with you if you don't quite meet the revenue requirement but have other signs of good financial health.

How much will a business loan cost?

The total cost of a business loan includes repaying the amount you borrow, plus interest and fees charged by the lender. Annual percentage interest rates (APRs) can start as low as 6 percent to 8 percent for a standard term loan for a business with solid credit, but can get up to 99 percent or higher based on variables with your financial standing. Fees can also differ by the lender. They may include origination or closing fees that add hundreds of dollars to your loan cost.

What disqualifies you from a small business loan?

You could be disqualified from getting a business loan if you don’t meet the lender’s minimum lending requirements. Those usually include a minimum credit score, time in business and revenue threshold. You could also be disqualified if you don’t have enough of a down payment, can't provide collateral or if your finances show a recent decline in revenue.

How we chose our best small business loan lenders

Bankrate's trusted small business loan industry expertise.

years in business

lenders reviewed

loan features weighed

data points collected

Accessibility

Access to small business funding is a challenge for many business owners. Rate hikes and bank turmoil have led to lenders tightening credit standards and eligibility requirements. This can make it difficult for startups, bad-credit borrowers and business owners in underserved areas to get approved for small business loans. 

Our experts consider several factors in this category and award higher scores to lenders that offer flexible loan amounts, fast approval and funding and inclusive time in business and annual revenue requirements.

Affordability

The affordability of a business loan often depends on a business owner's financial profile. A business with high revenue and a flexible budget will likely be able to afford most loan options. Businesses considered high risk, such as startups or those with bad credit, may struggle to find loans with affordable interest rates and reasonable fees. 

We consider a business loan affordable if the payments are manageable, you have the lowest possible rate based on your creditworthiness and there are minimal fees. Lenders that have lower rates, offer rate or fee discounts and have minimal fees receive higher scores. 

Customer experience

A good customer experience requires a lender to be transparent, efficient and responsive. Reputable lenders that value their customers are easy to communicate with, responsive to your questions and concerns and willing to go the extra mile to make sure you have a positive experience for the life of the loan.

Lenders offering online accounts and applications and a range of customer support availability score higher in this category. 

Transparency

While the Truth in Lending Act (TILA) protects consumers against unfair or harmful lending practices, it doesn’t apply to business loans. This can make it harder to get straightforward and upfront information on loan costs when comparison shopping. We score lenders that make it easy to find rates and fees, as well as eligibility and credit score requirements, higher than those who do not disclose information.

Flexibility

Loan flexibility is finding a loan to meet your needs, even if you don’t have high annual revenue, several years in business or the best credit score. Loan flexibility can look like lenders that offer multiple lending products, variety in loan terms or unique options to give business owners the opportunity to fund their businesses in a way that works for them.

Lenders scoring high in this category offer varied products and services to cater to all types of borrowers and businesses.

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Small Business Administration (SBA) Loans

The SBA helps small businesses get SBA loans by supporting them up to a certain loan amount.

SBA loans can be used for many purposes — including launching or expanding a business, purchasing inventory or equipment, or consolidating high interest debt.

SBA 7(a) Loan Program

• Can be used for a variety of purposes including acquisition of a business, purchase of real estate or equipment, tenant improvements, working capital to help manage cash flow and business expansion.
• Term loan amounts up to $5 million are available. SBA fees may apply.
• Allows more flexible loan terms, with longer terms and maturities and with less money down.

SBA 504 Loan Program

• Can be used for purchase of real estate, construction, equipment acquisition and refinancing debt.
• Maximum loan amount through Chase varies by project. An SBA fee applies to the CDC portion of the loan, and an origination fee may apply to our portion of the loan.
• Extended terms up to 25 years are available.
• Save money with competitive terms, amortizations, and long-term interest rates.
• Borrow up to 90% of the project cost or collateral value.

Make payments easier and grow your business

Sba express lines and loans.

• Can be used for real estate, business acquisition, equipment purchase or working capital needs.
• Term loans and lines of credit up to $500,000 are available to meet the ongoing needs of your business. SBA fees may apply.
• Fixed or variable interest rates.
• Flexible loan terms give your business more options.

SBA Preferred Lender

As a Small Business Administration (SBA) preferred lender, Chase works with small businesses to secure business loans with flexible terms, fixed and variable interest rates, and loan amounts up to 5 million. Small business loans provide working capital for starting a business, managing cash flow and expansion, and equipment purchase or refinancing debt.

Additional Business Financing Services

Commercial real estate.

Real estate lending for purchasing, building, or refinancing.

Business Loans

Financing for large investments with flexible repayment options.

How Much Does it Cost to Start a Business?

8 min. read

Updated April 25, 2024

What will it cost to start your business? This is a key question for anyone thinking about starting out on their own. You’ll want to spend some time figuring this out so you know how much money you need to raise and whether you can afford to get your business off the ground.

Most importantly, you’ll want to figure out how much cash you’re going to need in the bank to keep your business afloat as you grow your sales during the early days of your business. 

Typical startup costs can vary depending on whether you’re operating a  brick-and-mortar store, online store, or service operation . However, a common theme is that launching a successful business requires preparation.

And while you may not know exactly what those expenses will be, you can and should begin researching and estimating what it will cost to start your business.

• How to determine your startup costs

Like when developing your  business plan , or  forecasting  your initial sales, it’s a mixture of  market research ,  testing , and informed guessing. Looking at your competitors is a good starting point. Once you feel your initial estimates are in the ballpark, you can start to get more specific by making these three simple lists.

1. Startup expenses

These are expenses that happen before you launch and start bringing in any revenue. Here are some examples:

• Permits and Licenses: Every business needs a license to operate, just like a driver needs one to drive. Costs vary depending on industry and location.
• Legal Fees: Getting your business structure set up (sole proprietorship, LLC, etc.) might involve consulting a lawyer and at least will involve the basic business formation fees.
• Insurance: Accidents happen, and insurance protects your business from unforeseen bumps.
• Marketing and Branding: The ways to spread the word about your product or service. They could involve creating a website, creating business cards, or promoting social media.
• Office Supplies : Pens, paperclips, that all-important stapler – the essentials to keep your business humming.
• Rent/Lease: If you need to rent space for your business before you start selling, include those expenses in your list as well.

2. Startup assets

Next, calculate the total you need to spend on assets to get your business off the ground. Assets are larger purchases that have long-term value. They’re typically significant items that you could resell later if you needed or wanted to.

Here are a few examples:

• Equipment:  Think ovens for a bakery, cameras for a photography business, or computers for a tech startup.
• Inventory:  If you’re selling products, you’ll need to stock up before opening your doors (or your online store).
• Furniture and Decorations:  Desks, chairs, that comfy couch in the waiting room – creating a functional and inviting workspace might involve some upfront investment.
• Vehicles: If your business requires a vehicle to deliver your product or service, be sure to account for that purchase here.

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Why separate assets and expenses?

There’s a reason that you should separate costs into assets and expenses. Expenses are deductible against income, so they reduce taxable income. Assets, on the other hand, are not deductible against income.

By initially separating the two, you potentially save yourself money on taxes. Additionally, by accurately accounting for expenses, you can avoid overstating your assets on the balance sheet. While typically having more assets is a better look, having assets that are useless or unfounded only bloats your books and potentially makes them inaccurate. 

Listing these out separately is good practice when  starting a business  and leads into the final piece to consider when determining startup costs. 

3. Operating Expenses

Finally, figure out what it’s going to cost to keep your doors open until sales can cover expenses. Create a list that estimates monthly expenses, such as:

• Payroll (including your own salary)
• Marketing and advertising
• Loan payments
• Insurance premiums
• Office supplies
• Professional services
• Travel costs
• Shipping and distribution

Then, based on your revenue forecasts , calculate how many months it will take before your sales can cover all those monthly expenses. Multiply that number of months by your monthly operating expenses to determine how much you’re going to need to cover operating expenses as your business starts.

This number is often called “ cash runway ” and is a critical number – you need enough cash to fund those early red ink months. This number is how much cash you need to have in your checking account when you open your doors for business.

Calculating how much startup cash you need

To figure out how much money you need to start your business, add the asset purchases, startup expenses, and operating expenses over your cash runway period. This is your total startup costs, and it’s better to overestimate than underestimate these costs.

It often makes sense to invest the time to build a slightly more detailed starting costs calculation. Assuming you start making some sales and those sales grow over time, your revenue will be able to help pay for some of your operating expenses. Ideally, your sales contribute more and more over time until you become profitable.

To do a more detailed calculation, you’ll want to invest the time in a detailed financial forecast where you can experiment with different scenarios. If you do this, you’ll be able to see how much it will cost to start your business with different revenue growth rates. You’ll also be able to experiment with different funding scenarios and what your business would look like with different types of loans.

• Funding Starting Costs

You can cover starting costs on your own, or through a combination of loans and investments.

Many entrepreneurs decide they want to raise more cash than they need so they’ll have money left over for contingencies. While that makes good sense when you can do it, it is difficult to explain that to investors. Outside investors don’t want to give you more money than you need, because it’s their money.

You may see experts who recommend having anywhere from six months to a year’s worth of expenses covered, with your starting cash. That’s nice in concept and would be great for peace of mind, but it’s rarely practical. And it interferes with your estimates and dilutes their value.

Of course, startup financing isn’t technically part of the starting costs estimate. But in the real world, to get started, you need to estimate the starting costs and determine what startup financing will be necessary to cover them. The type of financing you pursue may alter your startup or ongoing costs in a given period, so it’s important to consider this upfront.

Here are common financing options to consider:

• Investment : What you or someone else puts into the company. It ends up as paid-in capital in the  balance sheet . This is the classic concept of business investment, taking ownership in a company, risking money in the hope of gaining money later.
• Accounts payable : Debts that are outstanding or need to be paid after a certain time according to your balance sheet. Generally, this means credit-card debt. This number becomes the starting balance of your balance sheet.
• Current borrowing : Standard debt, borrowing from banks,  Small Business Administration , or other current borrowing.
• Other current liabilities : Additional liabilities that don’t have interest charges. This is where you put loans from founders, family members, or friends. We aren’t recommending interest-free loans for financing, by the way, but when they happen, this is where they go.
• Long-term liabilities : Long-term debt or long-term loans.
• Other considerations for estimating startup costs

Pre-launch versus normal operations

With our definition of starting costs, the launch date is the defining point. Rent and payroll expenses before launch are considered startup expenses. The same expenses after launch are considered operating or ongoing expenses.

Many companies also incur some payroll expenses before launch because they need to hire people to train before launch, develop their website, stock shelves, and so forth.

Further Reading: How to calculate the hourly cost of an employee

The same defining point affects assets as well. For example, amounts in inventory purchased before launch and available at launch are included in starting assets. Inventory purchased after launch will affect  cash flow , and the balance sheet; but isn’t considered part of the starting costs.

So, be sure to accurately define the cutoff for startup costs and operating expenses. Again, by outlining everything within specific categories, this transition should be simple and easy to keep track of.

Your launch month will likely be the start of your business’s fiscal year

The establishment of a standard fiscal year plays a role in your analysis. U.S. tax code allows most businesses to manage taxes based on a fiscal year, which can be any series of 12 months, not necessarily January through December.

It can be convenient to establish the fiscal year as starting the same month that the business launches. In this case, the startup costs and startup funding match the fiscal year—and they happen in the time before the launch and beginning of the first operational fiscal year. The pre-launch transactions are reported as a separate tax year, even if they occur in just a few months, or even one month. So the last month of the pre-launch period is also the last month of the fiscal year.

• Aim for long-term success by estimating startup costs

Make sure you’ve considered every aspect of your business and included related costs. You’ll have a better chance at securing loans, attracting investors, estimating profits, and understanding the cash runway of your business.

The more accurately you layout startup costs and make adjustments as you incur them, the more accurate vision you’ll have for the immediate future of your business. 

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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• Best Personal Loans

Best Small Business Loans of June 2024

Our Loans Expert

Small business loans can be a great way to get necessary funding for your business. However, there are a lot of factors that go into picking the best loan, from the rates and fees to the repayment structure. In this guide, we'll discuss the different types of business loans and what to look for when comparing options. We'll also provide some of our top picks to help you start your search.

Best for businesses with high incomes but low credit scores

Credibly offers a variety of loan types to businesses that may not otherwise qualify with another lender.

• Loans available to business owners with less-than-perfect credit scores
• Loan officers that emphasize the importance of only borrowing what you need
• Five specific types of loans offered
• Fast approval and funding
• Daily, weekly, and monthly payment options
• High annual income requirement
• Startups typically don't qualify for funding
• Risk of losing collateral

Best for SBA loans and businesses that need in-person assistance

First citizens bank.

First Citizens Bank is an excellent small business lender with a wide variety of loan types, including all of the major SBA loans as well as some proprietary small business loan products. It has excellent customer service through its vast branch network, and could be a great fit for businesses located within the states where the bank operates.

• Variety of loan products
• Large branch network
• Highly rated customer service
• Application isn't fully online
• Branches are available in fewer than half of U.S. states

Best for established business owners with average credit who can't find cheaper financing

OnDeck offers short-term loans to established business owners with at least average credit, provided they can meet the revenue requirement. Repayment terms cap at 24 months and APRs are very high, so these loans are best for owners without cheaper options who can repay the loan quickly.

• Multiple loan types
• Accepts average credit scores
• No prepayment fee
• APRs are extremely high
• High revenue requirement
• Personal guarantee required

Best for well-qualified, established businesses

Funding circle.

Funding Circle pairs businesses that have been in business for at least two years with individual investors for term loans, lines of credit, and SBA loans. Eligible business must have at least fair credit, with a minimum accepted credit score of 660.

• Competitive rates for highly qualified borrowers
• Funding in as little as two business days
• Costly origination fees
• Businesses must be in operation for a minimum of two years
• Requires a lien on business
• Minimum credit score may be higher than some competitors

Best for business lines of credit

Bluevine specializes in business lines of credit that are easy to apply for, and also offers term loans through banking partners. It can be a great choice for businesses that can meet Bluevine's income requirements and want access to working capital as needed.

• Quick access to funds
• Easy application process
• Up to $250,000 in funding
• Short repayment terms
• Not for newer businesses

What is a business loan?

A business loan is an agreement between your business -- or you, as the owner of that business -- and a lender for an agreed-upon amount. The lender will give you the money, and in return, you agree to repay that money at specific intervals. You will likely also need to pay additional interest fees, based on an APR (annual percentage rate) disclosed during the application process.

Types of small-business loans

There are a variety of small business loan options depending on your needs and qualifications.

1. Term loan

The simplest form of small business loan is a term loan. Think of this as similar to a basic personal loan. You'll receive a set amount of money, and you'll need to repay it in regular, equal installments. Your interest rate will be set at the time of disbursement and your payments won't change for the duration of the loan. Once you repay the loan, you're done and the account is closed.

2. Line of credit

A line of credit is sort of like a reusable term loan, or perhaps like a credit card. You can draw on the line of credit, then repay the amount borrowed to free up funds. You can then draw on the line of credit again at a future date. Exactly how often or how much you can draw at a given time will vary by loan and lender.

3. SBA (Small Business Administration) loan

An SBA loan is a term loan guaranteed by the Small Business Administration and offered by various banks and lenders. SBA loans are good for lenders because the guarantee from the SBA reduces the risk; if you default on the loan, the lender doesn't lose as much money. SBA loans are also good for borrowers, since the reduced risk allows lenders to offer better rates, lower down payments, and more flexible requirements.

4. Equipment loan

Business owners who specifically need a loan to purchase new equipment may want to look into dedicated equipment loans. These loans are typically structured like a regular term loan, except the equipment you buy will act as collateral for the loan . This often means lower rates and fees, though a down payment may still be required in some cases.

How to choose a small business loan

Here are a few factors to consider when deciding on a business loan:

• Structure: Do you want a one-time loan or a recurring line of credit? What type of collateral, if any, do you want to put up? Are you willing to personally guarantee the loan? All of these questions will factor into which type of business loan you choose.
• Repayment: Each loan and lender will have its own repayment structure. You may need to make daily or weekly payments, or get away with monthly ones. Consider how often you want to make payments before choosing a loan.
• Cost: Interest rates and other fees can all impact the cost of a loan. These costs will depend not only on the type of loan you choose, but on the specific lender, your credit history, and even your business's revenue. It's best to compare multiple loan offers to ensure you get the most affordable loan.
• Timing: When you urgently need a loan, you may be more concerned with how quickly you can get funding over other factors. Just make sure you aren't letting haste lead you into a bad deal.

Alternative business funding options

If a small business loan isn't right for your company, consider these other ways to finance your business.

Small business credit cards

I love using small business credit cards as a source of short-term funding for three reasons:

• It can be free. If you pay off your balance in full before the due date, most cards won't charge you interest. If you need to carry a balance, you can get a card with an intro 0% APR deal to avoid interest fees on that balance, too.
• They're reusable. Credit cards are like a line of credit; as long as you keep paying them off, you can use them again and again. In fact, using and paying off your card on time every month is a great way to build credit.
• You can earn rewards. When the business budget is tight, earning that 2% to 5% cash back on your big expenses can go a long way.

Check out our best small business credit cards to find the right fit for your business.

Outside investors

Many businesses grow with the help of financing from investors. This could be as simple as taking on a business partner, or as complex as finding an angel investor or venture capitalist. Just keep in mind that most investors will want some sort of say in how your business is run. At the very least, you'll need to repay your investors with regular dividends or a percentage of your revenue.

Fundraising and crowdsourcing

Plenty of small businesses get off the ground with a little help from friends and family. (If you're not going to pay that help back, then they're donors, not investors.) In today's digital age, you can also look for donations from the world at large on a crowdsourcing platform like Kickstarter or Indiegogo.

Personal loans

If your business revenue isn't great but your personal credit is , you could potentially qualify for a personal loan even if a small business loan isn't an option. Most personal loans are term loans that typically range from 24 to 60 months, though shorter and longer loans are available. Interest rates will depend heavily on your credit and income.

Merchant cash advance (MCA)

A merchant cash advance is very similar to a personal cash advance. It's an extremely expensive type of short-term financing that promises a portion of your sales revenue as repayment. The pro of this type of financing is that your personal credit isn't much of a factor. The downside is that your interest rates can easily hit triple digits. This should be considered last-resort funding, and only if you have absolutely zero other options.

Fees and terms you can typically expect

The terms and fees you get with your loan will depend on a lot of factors. However, here are some general points to consider when comparing your options.

Fees to watch out for

• Origination fee: Many loans, especially term loans, come with an origination fee . It's generally considered to be for the administrative costs of the loan. Not all loans charge this fee.
• Interest fee: The main fee you'll pay on any loan is the interest fee. This will depend on your interest rate. The higher the interest rate, the more fees you'll pay.
• Factor rate: Some financing products, like MCAs, don't provide an interest rate. Instead, they provide the factor rate. Multiplying the factor rate with the principal amount tells you the total you'll need to pay back. From there, you (or an online calculator) can determine your APR.
• Prepayment fee: Some lenders may charge you a penalty fee for paying off your loan early. That's because paying your loan off early usually cuts down on how much interest you pay overall.
• Application fee: This isn't a super common fee, but a few lenders may charge a fee just to apply for a loan. (I'd personally avoid these lenders.)

Figuring out your repayment terms

Broadly, the loan terms are all the terms and conditions that apply to your loan agreement. More specifically, we usually use the phrase to refer to the repayment terms, including the APR and payment frequency.

How long you have to repay your loan will vary based on a lot of factors, starting with the type of loan. An SBA loan could have a long repayment term of 10 years or more. Many small business term loans will have shorter repayment periods of around two years. A line of credit could have an even shorter repayment period of a year or less.

Your business loan agreement will spell out all of the repayment terms. Be sure to read through it carefully. You want to pay attention not just to your payments or how long the loan will last, but also to your total overall payment and your total interest.

What you need to apply for a small business loan

The specifics of a loan application will depend on the kind of loan. In general, though, you'll need this information:

• Owners' personal information: If you're the only business owner, then you just need your personal info. If there are multiple owners, the lender may want everyone on the application. In many cases, the owner will need to undergo a personal credit check.
• Business tax ID number: Depending on the structure of your business, this may be your EIN (Employer Identification Number) or your personal Social Security number (if you're a sole proprietor).
• Business checking account info: The money you borrow will need to be deposited into a business checking account . Most lenders will also require payments to be made via debit card or ACH transfer from a small business bank account.

Business banking statements: You may need at least three months' worth of bank statements to prove your company's annual revenue. Depending on your business and the lender, you may require more in-depth profit-and-loss documentation.

Top picks for best small business loans

• Businesses with high incomes but low credit scores: Credibly
• SBA loans and businesses that need in-person assistance: First Citizens Bank
• Established business owners with average credit who can't find cheaper financing: OnDeck
• Well-qualified, established businesses: Funding Circle
• Business lines of credit: Bluevine

Brittney started her writing career in the world of science, putting her physics degree to good use. Her journey into finance started with building her personal credit, but soon grew into a borderline obsession with credit cards and travel rewards. For the last 7 years, she has enjoyed the ability to share her expertise with readers, as well as the opportunity to interview companies and individuals making an impact on our financial lives. She wholly believe most problems can be solved with the right research -- and a good spreadsheet -- and she specializes in translating complex financial topics into actionable advice to help educate and empower readers.

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.

The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.

Copyright © 2018 - 2024 The Ascent. All rights reserved.

• Best for Good to Excellent Credit
• Best for Fast Funding
• Best for High Balances
• Best for Bad Credit
• Best for Fair Credit
• Best for Loan Options

How We Review Debt Consolidation Loans

Best debt consolidation loans: your guide for 2024.

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate personal loans to write unbiased product reviews.

Debt consolidation is when you take out one loan and use it to pay off other debts that you have, leaving you with one monthly payment and interest rate. This can help you manage your debt more efficiently, and in some cases, reduce the total amount of interest you'll pay if the new loan's APR is lower.

Generally, you'll need a personal loan for debt consolidation, which means replacing multiple loans with a single loan instead.

Our Picks for the Best Debt Consolidation Loans

• Best for good to excellent credit: LightStream Personal Loan
• Best for fast funding: Upgrade Personal Loan
• Best for high balances: SoFi Personal Loan
• Best for bad credit: Avant Personal Loan
• Best for fair credit: Payoff Loan™
• Best for loan options: Wells Fargo Personal Loan

How we rank debt consolidation loans »

Compare Debt Consolidation Loans

The best debt consolidation loans help you work toward paying off debt by bundling multiple debts into one account, and they're generally only a good idea if you can get a lower interest rate than your various debts carry. We looked at lenders that are best for fast cash, a variety of credit scores, and for high debt balances to come up with our list of top picks.

Best for Good to Excellent Credit: Lightstream Personal Loan

0.50% discount on regular rates with AutoPay

6.99% to 25.49% (with AutoPay discount, rates vary by loan purpose)

$5,000 to $100,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Competitive APR
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Approval decisions should come shortly after applying
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Loans can be funded the same day
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Wide range of borrowing amounts and terms
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No fees
• con icon Two crossed lines that form an 'X'. Only available to people with good credit
• con icon Two crossed lines that form an 'X'. No pre-approval option

LightStream offers some of the lowest rates on personal loans out there, provided you have a great credit score. The lender also has loans of up to $100,000 and can supply you with funding on the same day you apply and are approved.

• Loan amounts range from $5,000 to $100,000
• Loan term lengths range from 2 to 12 years
• Apply online and you'll receive a response shortly during business hours.
• Receive your funds as soon as the same day
• Loans are made by Truist Bank, member FDIC

Lightstream is a highly regarded lender for many loan types, and has been a top pick across Insider's coverage of the best personal loans and best auto loans . However, this lender only works with borrowers with good or better credit, with a minimum credit score requirement of 660. 

LightStream offers consistently low personal loan interest rates , though its minimum interest rate for debt consolidation is higher than its typical personal loan's interest rates. However, this lender does not have any prepayment or origination fees. Same-day funding is available with LightStream. 

Watch out for:  Maximum loan amount limits. Only borrowers with excellent credit can borrow the $100,000 maximum, and anyone without excellent credit may not qualify for the full amount.

LightStream defines excellent credit as an account with five or more years of credit history, stable and sufficient income for debts, and a variety of credit history with little or no credit card debt. If you're looking for a debt consolidation loan, chances are you have a significant amount of debt, and may not fit these qualifications.

Additionally, LightStream doesn't have a way to pre-qualify online. You'll have to apply for the loan to find out exactly what your rates and terms could look like, which could make comparison shopping difficult. 

LightStream Personal Loan Review

Best for Fast Funding: Upgrade Personal Loan

8.49% to 35.99%

$1,000 to $50,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Small minimum loan amount
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Quick access to funds
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low minimum credit score
• con icon Two crossed lines that form an 'X'. Origination and late fees

Upgrade is a solid lender if you can qualify for its lowest interest rate. But if your credit isn't in great shape, you may be able to find a better deal elsewhere.

• Loan amounts range from $1,000 to $50,000
• Loan term lengths range between 2 to 7 years
• You can get your money within one business day after your loan is reviewed and approved
• Loans made by Upgrade's lending partners

Upgrade is great for fast cash because it allows you to get your money within one business day after your loan is reviewed and approved. 

You're also able to get a loan for as little as $1,000, which is less than many of the other competitors on our list. It could be a good choice if you only have a small amount of debt you need to consolidate.

What to watch out for:  Origination and late fees. Your origination fee will be late fee of up to $10 if you don't make a full payment within 15 days of your due date.

Upgrade Personal Loan Review

Best for High Balances: SoFi Personal Loan

0.25% AutoPay interest rate discount and a 0.25% direct deposit interest rate discount

8.99% - 29.49% fixed (with all discounts)

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. High maximum loan limit
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Unemployment protection
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No fees required
• con icon Two crossed lines that form an 'X'. High minimum credit score requirement
• con icon Two crossed lines that form an 'X'. High minimum loan amount
• con icon Two crossed lines that form an 'X'. No in-person support

SoFi is a strong personal loan lender for those with high credit scores — you'll get perks like unemployment protection and no fees required. The best personal loan for you depends on your credit score, which will determine what you qualify for and can lower your rate.

• Loan term lengths range from 2 to 7 years
• Usually receive your money in a few business days after your application is approved
• Unemployment protection if you lose your job during your loan repayment, allowing you to apply for a three-month forbearance, up to a total of 12 months
• Loans are made by SoFi Lending Corp.

A SoFi personal loan is the best option for anyone with a high balance, as this lender makes debt consolidation loans of up to $100,000. Debt consolidation loans from this lender are comparable in rates to those offered by LightStream, but SoFi offers higher loan limits to all applicants, whereas LightStream only allows some borrowers to borrow up to $100,000. Similarly, SoFi doesn't have any application or prepayment fees as well as doesn't require an origination fee. 

SoFi offers unique features like unemployment protection, which could put loans in forbearance for up to three months if you find yourself out of work. 

Watch out for:  Stringent requirements. SoFi personal loans have a minimum credit score of 680. According to NerdWallet, the average income among borrowers is over $100,000.

SoFi Personal Loan Review

Best for Bad Credit: Avant Personal Loan

Offers emergency, home improvement, and debt consolidation loans

9.95% to 35.99%

$2,000 to $35,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Funds generally deposited by the next business day
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No prepayment penalty
• con icon Two crossed lines that form an 'X'. Multiple types of fees
• con icon Two crossed lines that form an 'X'. High maximum APR
• con icon Two crossed lines that form an 'X'. Low maximum loan limit

Avant Personal Loan is a good personal loan provider, especially if you have a lower credit score and need to receive your loan money quickly. Just be prepared to pay a high APR if you do have a low score.

• Loan amounts range from $2,000 to $35,000
• Loan term lengths range between 2 to 5 years
• Administration fee of up to 4.75%, which will be deducted from your loan proceeds when the loan is funded, and late fee that varies by state
• Loans made by WebBank, member FDIC

Getting a loan with bad credit , whether to consolidate debt or for something else, can be expensive, or hard to qualify for. An Avant personal loan is the best bet for borrowers with poor credit, requiring a minimum credit score of 600.

Compared with other personal loan lenders offering debt consolidation loans for bad credit borrowers, Avant's terms are the most generous. While there is an administration fee, it could be lower than competitors' fees with a cap up to 4.75% in administration fees with an undisclosed late fee and returned payment fee. Avant also has the advantage of offering fast personal loan funding .

Watch out for:  High rates with a low credit score. While Avant is accessible to borrowers with poor credit scores, approval might go hand in hand with high interest rates on your loan.

Avant Personal Loan Review

Best for Fair Credit: Happy Money Personal Loan

The minimum rate for loan amounts above $15,000 is 11.75% APR

11.72% - 17.99% fixed

$5,000 to $40,000

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Competitive interest rates
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No prepayment or late fees
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low minimum credit score requirement
• con icon Two crossed lines that form an 'X'. Origination fees
• con icon Two crossed lines that form an 'X'. Slow access to funds
• con icon Two crossed lines that form an 'X'. Limited loan purpose
• con icon Two crossed lines that form an 'X'. Not available in all states

A Happy Money Payoff Loan personal loan is a great option for those with good credit scores who are eligible for the lender's lowest APR. However, borrowers can only use the funds to consolidate credit card debt.

• Loan amounts range from $5,000 to $40,000
• Origination fee anywhere between 0% and 5%
• Won't be able to get a loan from Happy Money if you live in Maine, Massachusetts, Nebraska, or Nevada
• Can only use for credit card debt consolidation
• Loans made by one of Payoff's lending partners

In the fair credit range, it can be tough to qualify for a personal loan with reasonable interest rates — many lenders have a minimum of 660 or 680. However, a Happy Money Payoff Loan™ could be a good option for people with credit scores as low as 640. Interest rates are comparable to those offered by LightStream and SoFi, but this lender has less stringent requirements. 

Compared with competitors Prosper and Best Egg , which both have the same 640 minimum credit score requirement, Payoff's interest rates are capped lower, and could have lower origination fees. 

Watch out for: Origination fees. Payoff offers loans with a 0% to 5% origination fee. Competing lenders Prosper and Best Egg charge 1.00% to 9.99% and 0.99% and 9.99% origination fees, respectively. The better deal will depend on your credit score, income, and repayment term.

Happy Money Personal Loan Review

Best for Loan Options: Wells Fargo Personal Loan

Relationship discount of 0.25%

8.49% to 24.49% (with relationship discount)

$3,000 to $100,000

Undisclosed

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Large maximum loan amounts
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Discounts for current customers
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Established brick-and-mortar lender
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No origination fee or prepayment penalty
• con icon Two crossed lines that form an 'X'. Significant late fees
• con icon Two crossed lines that form an 'X'. History of mismanaging customer information
• con icon Two crossed lines that form an 'X'. No online applications for non-customers

Wells Fargo Personal Loan are a good choice if you need a significant amount of cash, as you can borrow up to $100,000 with the lender. However, if you're not a current customer, you can't apply for a personal loan without visiting a branch.

• Loan amounts range from $3,000 to $100,000
• Term lengths range from 1 to 7 years
• Rate discounts to customers who have a checking account with the bank and who make their loan payments automatically through that account
• Non-customers must apply by visiting a branch and talking with a banker
• Loans made by Wells Fargo, member FDIC

Flexibility makes Wells Fargo personal loan a top contender for best personal loans for debt consolidation. Wells Fargo separates debt consolidation loans from personal loans, but the interest rates are the same.

Benefits include competitive interest rates and an autopay discount of 0.25% if payments are made from a Wells Fargo account . For unsecured personal loans, the most common type for debt consolidation, there are no origination or prepayment fees.

Wells Fargo can send your loan funds to your Wells Fargo bank account, or to a credit account outside of Wells Fargo to pay down your debts directly. 

Watch out for:  Wells Fargo's history with data security and compliance. The bank has faced several federal penalties for improper customer referrals to lending and insurance products, and security issues tied to creating fake accounts several years ago. 

Wells Fargo Personal Loan Review

Which debt consolidation loan lender is the most trustworthy?

We've compared each institution's Better Business Bureau score to give you another piece of information to choose your lender. Whether you're considering a $5,000 loan or a $10,000 loan , a trustworthy lender can improve your loan experience. The BBB measures businesses based on factors like their responsiveness to customer complaints, honesty in advertising, and transparency about business practices. Here is each company's score:

With the exception of Wells Fargo, our top picks are rated A+ by the BBB. Keep in mind that a high BBB score does not guarantee a positive relationship with a lender, and that you should continue to do research and talk to others who have used the company to get the most complete information possible. 

Wells Fargo is currently rated an F by the BBB due to government actions against the business and a failure to respond to 14 complaints. Most recently, the Consumer Financial Protection Bureau in December 2022 ordered Wells Fargo to return $2 billion to customers and pay a $1.7 billion penalty for legal violations involving auto loans, mortgages, and deposit accounts. The bank illegally charged fees and interest penalties on auto and mortgage loans. Additionally, it misapplied payments to those loans for many customers. 

If you're uncomfortable with this history, you may want to use one of the other personal loan lenders on our list.

How to Choose a Debt Consolidation Loan

The main benefits of consolidating debt are streamlining your debts into a single account with one monthly payment and reducing the total amount of interest you'll owe.

When shopping for a debt consolidation loan, look for an APR that is lower than the average you're paying on the debt you want to consolidate. If you can't qualify for a lower rate, a debt consolidation loan might not be a good choice for you.

Also consider the loan amounts, associated fees and penalties, as well as a lender's credit score and other eligibility requirements when choosing a debt consolidation loan.

Personal Finance Insider's mission is to help smart people make the best decisions with their money. We understand that "best" is often subjective, so in addition to highlighting the clear benefits of a financial product, we outline the limitations, too. We spent hours comparing and contrasting the features and fine print of various products so you don't have to.

How to Qualify for a Personal Loan for Debt Consolidation

Qualifying for a debt consolidation loan is the same as it is for most other kinds of personal loans. 

Generally, lenders require a credit score in the mid-600s, although some will accept borrowers with lower scores. Remember, though, that with a lower credit score you'll pay a higher interest rate.

In addition to checking your credit score, debt consolidation companies will also need proof of your employment and ability to repay in order to determine eligibility. They will also check your debt-to-income ratio to make sure you haven't borrowed more than you can feasibly pay back.

Most lenders will allow you to prequalify for a loan, which allows you to compare interest rates and terms without affecting your credit score. 

How to Apply for a Debt Consolidation Loan

After you've gotten prequalified with several lenders, compare their offers and choose the one that best suits your needs. To complete the  full loan application process you'll need a significant amount of documentation, including things like: 

• Pay stubs/proof of income
• The last couple years of tax returns
• Documentation of 401(k)s and other financial accounts
• Rent/mortgage history
• Proof of collateral, if you're pursuing a secured loan

Get these basics in order before applying for the loan, in order to speed up the process. You can apply for most loans by filling out a form online.

If you are approved, the lender will send you the final loan documents to sign off on. These include all the details such as the interest rate, the amount of time you have to pay it off, the amount you're borrowing, the monthly payments, and any fees. Make sure you fully understand all of it before signing for the loan.

Alternatives to Debt Consolidation Loans

If you're looking for a debt consolidation loan because your credit cards carry high APRs, it's worth your time to consider some alternatives .

One often underutilized strategy is to simply ask your credit card company for a lower rate. There's no guarantee that they'll agree. However, they may well do so, especially if you've been diligent about payments. You can also ask about upgrading your credit card, which may come with a lower APR and other perks. 

You may also be able to get a lower rate by transferring your balances to a different credit card. Cards designed for this purpose often come with an introductory 0% APR period that can last anywhere from 12-18 months. Tackling your debt head-on using strategies such as the avalanche and snowball methods is another alternative.

We consulted loan and financial planning experts to inform these picks and give their insights into finding the best loans for your needs. You can read their advice at the bottom of this post.

• Andre Jean-Pierre , senior wealth advisor and managing director at Aces Advisors
• Forrest McCall , founder of Don't Work Another Day
• Fred Winchar , CEO and co-founder at MaxCash
• Ryan Wangman , former loans reporter at Personal Finance Insider

Generally, What Makes a Personal Loan Good or Not Good?

Andre Jean-Pierre:

"One of the most important factors to consider in a personal loan is the interest rate. Because personal loans are typically unsecured, they usually carry higher interest rates than secured lending options. However, if a person has a strong credit profile, a personal loan can carry a lower APR than other unsecured sources of financing such as credit cards."

Forrest McCall:

"One of the best ways to use a personal loan is to pay off other high-interest debts like credit card debts. Because you can often lock in lower rates than a revolving line of credit like a credit card it can be a smart decision for your finances and save you thousands in interest payments over time."

How Should a Borrower Decide if They Should Take Out a Personal Loan?

Fred Winchar:

"Whether or not to take a personal loan depends on if one can afford it. The purpose of the loan and the value that comes with it is of importance to note. In most cases, it is beneficial to use the loan to invest in a project that can bring extra income or savings."

Ryan Wangman: 

"Borrowers should carefully consider alternatives to personal loans before taking one out. Personal loans can come with high interest rates, especially for borrowers with poor credit. If you can't fit those monthly payments into your budget, steer clear of the loan."

Methodology

To find the best personal loans for debt consolidation, we combed through the fine print and terms of about a dozen personal loans to find the ones that were best suited to help with consolidating debt. We considered four main features: 

• APR range: For the most help with debt payoff, a personal loan for debt consolidation needs to have lower interest rates than the credit card or other debts you're consolidating. We looked for the loans that had the lowest rates possible for each credit range and purpose. The average credit card interest rate was 16.65% in the second quarter of 2022, so we focused on loans that had the potential to beat this. 
• Appropriate loan amounts:  We looked for personal loans that had the most variety in loan amounts. According to loan comparison site Credible , the median amount of debt consolidated in May 2020 was $18,000. To benefit the most borrowers, we included personal loans with maximum limits over $10,000. 
• Minimum credit score requirements: Where available, we considered the minimum credit score requirements for each company. We considered loans for excellent, fair, and poor credit, grouping loans into categories based on these credit score requirements.
• Fees:  We considered fees like origination or administrative fees in our decisions, looking for loans with the fewest or lowest fees. None of the best loans listed have prepayment penalties. 
• Nationwide availability: We only considered loans with availability in most or all 50 US states. 

See our ratings methodology for personal loans »

Personal loans are the most common type of loan used for debt consolidation. Other options for consolidating debt include a  home equity loan , a home equity line of credit (HELOC), and a balance transfer credit card .

When you take out a debt consolidation loan, the funds are used to pay down the debts you have with multiple lenders, leaving you with a single monthly payment to make. It does not erase your debt, and you might end up paying more over the long term even if  you end up paying less each month on the consolidation loan.

Your credit will often be boosted in the long run if you consolidate your debt because it can reduce the amount you owe and lower monthly minimum payments, which all affect your credit score. With a debt consolidation loan, you can benefit from a lower interest rate.

Most personal loans allow a variety of uses. While most include credit card consolidation or debt consolidation, not all do. Read the fine print of any personal loan you're applying for, and make sure that debt consolidation is an acceptable use of the proceeds. All of the loans we considered had an option to use the loan for debt consolidation, if not a separate loan, which we included details for. 

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards .

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

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