The short answer is: yes. Every time you apply for a business (or personal) loan, lenders will conduct a thorough credit check. This can knock a few points off your FICO score — usually less than 5.

That said, most online lenders run what’s called a soft credit check that does not affect your credit score, using a simple online application. The lender can get a feel for your qualifications without affecting your credit score.

To sum it up, soft credit pulls will not affect your credit score...and hard credit pulls will. Be sure to check with your Financing Advisor to check if you need a soft or hard credit pull — so you shouldn’t go crazy with those applications. But once you qualify for a loan and pay it off on time, your personal and business credit score will improve.

Most small business owners need loans to get their business off the ground. But applying for multiple small business loans can be nerve-wracking — how can you improve your chances of getting accepted? And how will those applications affect your credit score?

If you’re stressed about the effect multiple small business loan applications will have on your credit score, this post is for you. We’ll tell you everything you need to know about applying for a small business loan so that you can move forward with confidence.

Steps To Apply For A Small Business Loan

Let’s start with the basics. How do you start a small business loan application?

It’s easier than you might think. As long as you do your research and make sure you’re 100% prepared, your small business loan application will be a breeze.

Here’s a step-by-step guide through the process:

1. Find The Type Of Loan You Need

Believe it or not, there is more than one type of small business loan. The type of loan you qualify for will depend on your needs.

For example, if your business already has a year or more of experience and proven revenue, you might qualify for a government-backed loan. If you need financing to manage your day-to-day expenses, you could apply for a term loan.

Talk to a financial professional about your business’s needs before you start the application process. That way, you’ll know what type of loan you’re applying for.

2. Look Into Different Lenders

3 different types of lenders supply small business loans: banks, online lenders, and government programs.

So, how do you know where to apply for a small business loan? Do your research and compare your options. Every small business has different needs. For example, bank loans are great for an established business, but banks requirements can be difficult to meet. This is where an online lender would be a great choice to submit an application as their restrictions are much less stringent than a traditional bank and credit score usually isn't a factor.

If you’re interested in small business loans for coronavirus, you might want to fill out an SBA loan application. The US Small Business Association (SBA) is accepting applications for small business loans during COVID-19 to help businesses stay open through the pandemic and lockdowns.

3. Find Out If You Qualify

Unfortunately, not every small business owner will qualify for a loan. It can be difficult to secure funding when you apply for a small business loan with bad credit — but it is possible. You can improve your chances by doing your research and going to the right lender.

Talk to your financial advisor or read through your favorite finance blogs for tips on how to qualify for the small business loan you need.

4. Gather Your Documents And Apply

Before you apply for your loan, make sure you have all the required documents. That includes:

  • Tax returns
  • Bank statements
  • Financial statements

If you’re not sure whether or not you’ll need a certain document, keep it accessible anyway. It’s always better to be overprepared!

Requirements To Apply For A Small Business Loan

Now that you have an overview of how to apply for a small business loan let’s talk about the requirements.

Not every lender has the same requirements. However, there are some basic things you will need before you apply for any small business loan. Here are a few essentials:

1. Financial Records (Annual Sales)

Whether your business is established or just getting started, most lenders will require proof of income to pay back the loan.

You will typically need to provide bank account statements that show frequent deposits. This, of course, depends on the type of financing you are applying for.

Most importantly — can your business income support daily, weekly or monthly payments on the loan?

2. Time In Business

Getting a loan for a brand-new startup is virtually impossible. To show lenders that you have the skills and experience to grow your business, it’s important to have at least 6 months of business time under your belt.

Business owners are best qualified for a loan when they have been successfully earning revenue for a year or more.

3. A Good Personal Credit Score

Even though the loan is for your business, lenders want to know that you are capable of managing your personal finances.

Business owners with a bad credit score will have a difficult time qualifying for a loan at a traditional bank.

Should You Apply For A Small Business Loan?

Times are tough, especially for small business owners. Whether your business is brand new or established, you might need a financial boost to keep your head above water.

Fortunately, that's what small business loans are there for. As long as you pick the right lender and qualify for a loan with great rates, you’ll be able to maintain your business growth through these challenging times.

If you’re looking for more tips, check out our small business loan cost guide. We put together a list of the pros and cons, plus information on how to apply for a small business loan.

Here’s the bottom line: as long as you are starting with good credit and don’t apply for too many small business loans at once, your loan applications shouldn’t damage your credit score. The right loan will make a difference for your business — so don’t hesitate to apply.

About the Author, Madison Taylor

Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates! Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.