For many businesses, securing more financing is the key to accelerating growth. There are several effective pathways to getting a loan for your business, and there are plenty of good reasons to seek one out.
We asked entrepreneurs for their stories with business loans, and they responded with their own accounts. If you’ve been wondering where entrepreneurs apply, how many times they apply, and what they apply for, check out their experiences. These individuals prove that success comes in many different forms.
“I secured a loan with a bank — something that was and is still unheard of in Silicon Valley.
“It wasn't easy to convince a bank to loan me the money to start my company but I personally guaranteed the loan which helped. Also, I ended up agreeing to some very onerous requirements which included having to be profitable from the very start, something else that is unheard of in Silicon Valley. No startup is profitable in its very first quarter, but we were.”
Most entrepreneurs won't land a loan to launch their business; banks want to see evidence of profitability before they lend. In Zinn's case, he had to agree to a strict condition that many new businesses would not be able to honor.
But Zinn says he wasn't looking to angel investors, venture capitalists, or friends and family to loan him the money — he was determined to run his company without the involvement of these types of investors, who can sometimes demand too much stake in a business. Zinn's method allowed him a degree of freedom that many startups can't match.
“I was thousands of dollars in debt before starting my digital marketing and SEO business, but had a clear goal and plan to become successful and be financially free.
“I thought for many weeks about taking a business loan out and was unsure if I was ready for more bills. After a lot of research and mapping out ideas, I came to the conclusion that a loan would be the best start to grow my business.
“Since I work in the online industry developing highly effective technology techniques and software, looking for an online lender was a no brainer. It well suited my job and lifestyle and would allow me to better my skills and knowledge in this realm of work.
“It took me three tries before getting the loan I was applying for, but it sure was worth the wait. Once this was achieved, we properly set up a functioning system to reach big goals within our business.”
Franklin applied with online lenders, which are sometimes less stringent with their requirements. Traditional lenders want to see a high credit score and a history of success, but they can offer you low rates if you're approved.
Conversely, online lenders often examine several more factors to analyze the potential for success before approving an applicant.
“It took me three tries before getting the loan I was applying for, but it sure was worth the wait.”
“A time came when my business was flourishing fair enough and I decided to expand it. For this purpose, I required new employees and upgraded web design, as well as official equipment. After all estimation, I concluded that [even] after paying interest on the loan still, I could generate more revenue as per expectation.
“I had chosen online lenders because we were taking the loan for the long term, not for a year, and required minimum interest rates. I had no issues in following the payment schedules. The most important thing was I got quick loan approval after applying to three lenders.
“It helped us to target the related goals. . . . Now we have a planned expansion with remarkable success.”
Seiter wanted a quick loan, and online lenders allow you to move faster than a traditional lender. Working through a loan marketplace, like Lendio, would allow you to apply to several lenders at once.
“We applied for a business loan because we couldn’t scale without hiring new people. We knew we had a good chance of increasing our revenue massively, but there was no way to do it without hiring new people — and we couldn’t afford to pay for that. So basically, we needed money to make more money, so we applied for a business loan.
“We applied traditionally because we had been through the process before. We didn’t have to look for long — the second lender we spoke to approved our loan because we had solid data about our business, including CAC, LTV, MRR, and other relevant metrics.
“The loan helped us grow from 10 to 50 people in just under six months. We used the money for salaries rather than complex growth hacks, and it paid back to us tenfold.”
Aite's story exemplifies a common reason for securing a business loan: hiring more personnel. Tim Fulton of Small Business Matters asserts that the average revenue per employee for a small business is $100,000. It's not as clear-cut as more employees directly leading to more revenue, but if you quintuple the size of your workforce like Aite did, it's likely to pay you back.
“We used the money for salaries rather than complex growth hacks, and it paid back to us tenfold.”
“I applied for a business loan after running my business for a year. The reason behind this was I started from freelancing and collected enough money to support my business for a year. Moreover, I wanted to understand the basics of business practically before taking any big move. So, I thought about applying for a loan when my business started generating a 27 percent profit. I had confidence in myself that now I can upscale it. I took out a loan to expand my business because, at that time, I was completely aware of my past mistakes and already had working strategies.
“I believe in this digital era; we do not need traditional lenders. Online vendors have a massive database of individual investors and institutions. Moreover, I had the option to see my loan progress. I had a peace of mind by knowing that they have transparent fees and terms unlike most of the traditional lenders. My credit score was above 600, so my application got accepted in the first try.
“Before taking a business loan, I prepared a detailed plan of using it. I was completely aware of my W's — what, who, why, when, and where. So, online lenders were my source for a loan, and my plan was ready. I was aiming to reach new clients. For this purpose, I needed digital marketing and increasing the workforce by 40 percent. We invested much in digital marketing because, at that time, we had enough budget to invest and to handle new orders effectively. As a result, my clientele increased and profit increased by 30 percent. I aimed to increase it to 35 percent, which I did not achieve. Still, I expanded my business successfully, which was the primary purpose behind taking the loan.”
Bran spent time building up his business before applying to an online lender, and it only took him one shot to be accepted. Bran had the foresight to invest his funding in a service some small businesses overlook: digital marketing. By increasing his digital presence, his profit increased 30 percent, and it's a testament to his careful planning and strategic use of his loan.
“After success with my first website UponaMattress.com, I was looking to buy another one. I had some money in the stock market I could have used, but I didn't want to pay taxes on my gains by selling. Taking out a loan meant that I could keep that money working. I knew that if I ran into trouble I could always sell the stock and pay off the loan.
“I worked with a traditional lender for an SBA loan, but opted for a loan from a family member instead. The interest rate was about the same, but I was able to move much faster to capitalize on a deal.
“The loan helped me quadruple my business and allowed me to pursue new markets. I gave my assistant more hours and hired two new writers.”
Bromen already had a way to pay off his loan if things went south, which is more than many entrepreneurs can say. If you're a careful investor, you may see yourself in Bromen's story.
SBA loans have plenty of perks, like long term lengths and a cap on their interest rates, but Bromen opted for a loan from family because he was able to move forward faster. We've mentioned that loans from traditional lenders can take a long time to get approved, but you can also wait a long time before the amount is usable.