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Money. It’s the lifeblood of every small business. In a perfect world, you’d have plenty to pay your ongoing operations bills. Plenty when you want to expand or upgrade. Or when you need to stock up on inventory. Enough money to easily handle emergencies. Or take advantage of surprise opportunities. But what small business owner operates in a perfect world? No one we know. So for you, we have three words: small business loans.

That said, a “loan” for your business can take many forms. As an entrepreneur, you need to know what’s out there to help you. You need to know how to evaluate those options. And, above all, you need to avoid common mistakes when you apply. If you can do all that, you’ll be ready to choose the right small business loan whenever you need money.


Applying for a small business loan can be daunting. It can be time-consuming. There is a lot to know, but there is a lot of information available to help you. Unfortunately, not all that information is accurate. And many small business owners make assumptions about business financing. That’s a mistake right there. Making the wrong assumption can keep you from getting the funding you need.

SmallBizTrends notes that “the market has been improving for small businesses seeking loans. But in order to get a lender to take a flyer on your small business, it’s best not to make a rookie mistake on your way to getting that loan approval.” Here are 7 mistakes you should avoid:

  1. Not knowing your personal and business credit scores. Or regularly checking your business credit report. They must be up to date and accurate when you apply for a small business loan.
  1. Borrowing just to get some extra money. Know what you need. Lenders want to know your plan for the capital. Is your plan well-thought-through? How will it help your business grow (or help you get past a financial problem)? Are you asking for the right amount – not too much, but not too little to accomplish your goal? That said, there are times when a small business loan to boost cash reserves makes sense. For example, when you’re facing a big tax payment soon.
  1. Assuming a bank is your best source for business financing. This is rarely the case, unless you need a very large amount to purchase real estate, remodel, etc. Or to make a significant equipment investment. In this case, SBA backing can help you get that bank loan.
  1. Assuming you can’t get funding without collateral. Some business loans do require collateral, or even a personal guarantee. But many do not. These include accounts receivable factoring, merchant cash advance, and revenue based business loans. Business lines of credit and credit cards are generally unsecured too.
  1. Running up your business debt. Maxing out your business credit cards or line of credit says you are not a good money manager. It tells lenders you’re over-extended. No one will want to loan you more, because you’re too big a risk. And if you think you can simply apply for yet another business credit card, you’re wrong.
  1. Waiting till your back is against the wall. I’m not talking about emergencies here. I’m talking about ignoring your financial problems until you’re desperate. By this time you’ve probably racked up back business credit as well as debt and frustration. It’s hard to even think clearly. And even the most lenient lender will back away.
  1. Wasting time. Time is money, especially for your small business. Floundering around looking for the “best” small business loans can be a critical mistake. Delay could cost you a great new job. Or close your doors while you wait for repairs.


Know when to borrow money for your business. For instance, the right small business loan can help you:

  • Maintain momentum when business is booming
  • Get the new equipment you need right away – to replace a failing unit, or upgrade so you can stay competitive
  • Follow up on a just-discovered, game-changing new opportunity
  • Bring in all the new inventory you’ll need for a record-breaking holiday season

Again, SmallBizTrends offers good advice. “Apply the same intensity to your small business loan search as you would to searching for the right vendor or the perfect product. … There are more lenders available to small businesses these days, and not all are created equal. Failing to shop around is doing your small business a disservice.”

Know that there are special programs to help women, minorities, and veterans get business funding. Here at United Capital Source, we are excited to work with a growing number of women entrepreneurs. And we’re proud our country is doing more to help veterans become business owners. And help you keep your business growing. When it’s time for your next small business loan, our 10 tips will help you be prepared to get what you need.

Know what it takes to apply for a small business loan. The Small Business Administration has a handy checklist you can use. You won’t need anywhere near this much paperwork to apply for alternative funding. But think how much you’ll impress any lender if you have all your stuff together!

Realize that borrowing money is a proven cash management tool. If you borrow wisely. Deliberately, with a purpose in mind. The best way to create a proactive future-forward borrowing plan is to talk to us right now. When you may not need to borrow at all. Our United Capital Source lending experts have a single mission: to help small businesses prosper. We’re in it for the long haul. So we want to help you make smart, effective decisions to secure your future. And if you do need a small business loan right away, we’ll put you into the right program. Without making mistakes.

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