Most types of business loans work in a similar way, however, there will be slight differences depending on your loan type, lender, and term agreements. First, you will apply for a loan and fill in a brief questionnaire about your financial background, loan funds, and professional goals. You will either send an application to a direct lender or a lending marketplace that connects you with a variety of options.
Next, a financial institution will reach out and offer you a set loan amount with the addition of fees and interest rates. Oftentimes, you will offer collateral or personal guarantee to ensure you pay back the loan on time.
Once initial approval is complete, and you agree to the loan amount, you’ll be paid cash in a lump sum amount or line of credit. Keep in mind that the time it takes to receive your funds will depend on the lender. Sometimes you’ll receive money the next day or within five business days.
The lender will inform you of the repayment schedule, and you’ll gradually make payments daily, weekly, monthly or bimonthly within that window of time. In the meantime, you can use the cash within your business for a variety of needs and purposes. If you don’t pay off your loan in time, the lender will have the freedom to take your collateral or other assets.