March 15, 2023

Small Business Bank Lending: What to Expect

How to navigate the small business loan process

If you’re a small business looking for a loan, you might not know what to expect when contacting a bank. You can prepare for the loan process by knowing what projects small business loans typically cover, the usual terms associated with these loans, and the main eligibility requirements you’ll need to meet. You might also want to know the benefits of receiving a small business loan from a community bank to ensure you receive the best loan possible.

What Is a Small Business Loan?

A small business loan is a type of financing designed to give businesses the capital they need to invest in their future. As a small business, you can often find loans for several purposes, such as technology investments, business acquisitions, renovations, staff, real estate purchases, and working capital.

What Terms Are Usually Associated with a Small Business Loan?

Usually, a small business loan will require a down payment from the borrower, with this payment calculated as a percentage of the project’s costs. When you take out a small business loan, you’ll also need to discuss the loan terms with the bank. These terms will include the repayment period and the interest rate associated with the loan.

Besides the down payment and loan period, a small business loan may also require a financial covenant. If a loan requires a financial covenant, you’ll agree to specific restrictions set by the bank while you pay back the loan. A bank might also require a personal guarantee, where you agree to be personally responsible for the full repayment of the loan.

What Information Will Banks Need to Determine If You’re Eligible for a Loan?

Once you discuss the type of small business loan you want to take out and the project you’ll be using the loan to fund, the bank will determine your eligibility. While banks will often have different criteria for eligibility, there are a few factors they typically look at. These factors include:

  • Personal character and background
  • Time in business
  • Business and personal credit score
  • Bank statements
  • Collateral
  • Monthly sales or annual revenue
  • Relevant legal documents for your business
  • The loan’s purpose
  • Business plan featuring projections
  • Business and personal tax returns

Once you provide this information and any other required documents to the bank, they will determine your eligibility and either deny or approve your request for a loan. 

What Are the Benefits of Using a Community Bank for Small Business Lending?

When you look for a small business loan, a community bank is one of the best lenders you can turn to. Find out more about the main benefits of choosing a community bank for your small business loan below:

  • More accommodations and lending opportunities: Since community banks are staffed and run by people in your local community, they’ll often be more familiar with your business’s reputation and want to see your business succeed. Instead of being a number on a screen, they’ll see you as a person, recognizing how a loan could help you contribute to the local economy. As a result, they’ll be more likely to offer accommodations and flexibility to get you the funding you need to grow or start your business.
  • Greater reliability: Unlike national banks that are prone to moving locations, community banks are connected to your area and unlikely to leave any time soon. When you turn to a community bank, you can expect them to prioritize you and stick around for many years to come. Due to this greater reliability, you’ll always know where to go when you need to discuss your loan or additional funding opportunities.
  • Fewer fees: At a national bank, you usually pay more fees since these banks rely on them to increase their profitability. In contrast, community banks are much more likely to have fewer fees. Community banks also tend to be more accommodating, providing small businesses with free accounts or limiting their monthly maintenance fees to give their clients the best experience possible. 
  • Similar online experience and services: With a community bank, you can still receive all of the mobile and online business banking tools you’d receive at a national bank. When you need business banking online services, a community bank can also offer cash management services, online loan payments, quick money transfers, eStatements, alert notifications, and other tools to help you operate your business with confidence. These online tools give you the convenience of modern banking without sacrificing the personalized customer service local banks are known for.

Choose BayCoast Bank for Small Business Loans in Massachusetts and Rhode Island

BayCoast Bank is ready to help businesses in Southeastern Massachusetts and Rhode Island succeed. We offer several different types of small business loans, such as lines of credit, commercial real estate loans, long-term financing for business expansion and equipment purchases, and construction loans. Besides offering several loans, our online business banking platform and loan officers make the loan process easy and convenient. You can also contact us for business checking and savings accounts, investment assistance, and insurance solutions.

When you need small business loans in Massachusetts and Rhode Island, we have you covered. Learn more about our small business loans today. If you have any questions or want to apply for a loan, please contact us or visit a branch near you.

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