Securing a $60k business loan can provide the funds you need to start or expand a business, but it’s important that you secure financing that’s right for your business.

In this article, we discuss the kinds of financing available, as well as the steps you’ll need to take to secure a $60k business loan. Additionally, we provide some tips for securing a loan with bad credit or limited business history.

Key Takeaways

• First, determine which kind of financing is right for your business. Next, pick a lender that’s likely to approve a $60k loan.
• If you’re approved, the lender will propose a loan agreement. Thoroughly analyze this document before signing it. After you sign it, expect to see the $60k in your business bank account in 2-14 days.

Types of Business Financing to Get $60,000

SBA Loan

An SBA loan is a lot like a conventional business term loan, but there are notable differences that can lead some borrowers to choose one over the other. SBA loans are essentially conventional business term loans that are backed by the SBA. If you default on one of these loans, the SBA will reimburse your lender a portion of what they lost—usually 50%-80% of the loan’s value.

SBA loans are easier to secure, but they can have higher interest rates and stricter lending terms. However, the interest rate on an SBA loan is capped, meaning it can only go so high.

The term on an SBA loan is determined by the loan’s purpose, but most are 10-30 years. If it’s an SBA 7(a) loan that’s being used as working capital a term of 10 years or less is common. If it’s a 504 loan that’s being used to purchase real estate, expect a term of 10-30 years.

It takes most borrowers 1-3 months to secure an SBA loan. The review process is longer because there are three parties involved: you (the borrower), your lender, and the SBA.

To secure a $60k SBA loan, you’ll likely need to put up collateral and sign a personal guarantee. Also, you’ll need to make a down payment of 10%-30%.

If you default on an SBA loan, you may be eligible for loan forgiveness through their Offer in Compromise program. Of course, you’ll have to pay back some of what you owe, but you’ll have more time to do so. However, not everyone who applies for loan forgiveness is accepted, so don’t take out an SBA loan with an expectation that you’ll be able to get it forgiven later.

In the end, SBA loans are great for borrowers who have bad credit or limited business history. That said, they can be expensive, which means securing one can do more harm than good if your business’ financial position is precarious.

Business Term Loan

If you’re looking to borrow $60k for your business, consider a business term loan. These loans are beneficial for a handful of reasons, but securing one may be challenging because you’ll need strong credit and solid financials to be approved for one of these loans.

The average interest rate on a standard business term loan is 6.25%-8.7%, but several factors determine what your rate will be, including your creditworthiness, your business’ finances, the purpose of the loan, and the current price of credit. Of all the financing options discussed here, business term loans can have some of the lowest interest rates and best lending terms depending on your credit rating.

The term on a standard business loan is usually 10-30 years, and in most cases repayments are made monthly. However, if you want to avoid paying an arm and a leg in interest, you could opt for an expedited repayment schedule.

You may be able to get a conventional business term loan in just 24 hours, but usually it takes 1-2 weeks to secure this type of financing. That said, if you apply with excellent credentials, it shouldn’t take longer than a week to secure the financing you need.

To secure a business loan, you may have to put up collateral worth 80%-100% of the loan amount. On a $60k loan, collateral worth $48,000-$60,000 will be required. Also, your collateral must be appraised by the lender before it can be accepted. Many business owners put up their homes to secure a loan, but automobiles, boats, collectibles, and valuable assets are acceptable too.

Also, you’ll probably have to sign a personal guarantee to secure funding. This agreement gives the lender the right to seize and sell your personal assets if you default on the loan.

Additionally, you’ll need to make a down payment of 10%-30%. The size of your down payment is based on your creditworthiness and other factors. Lenders require a down payment to reduce their risk and shows that a borrower is committed to the financing.

If you default on a conventional business loan, the lender will seize and sell your collateral to offset their loss. If selling your collateral doesn’t offset their loss, they’ll get the personal guarantee enforced and make up the difference by selling some of your personal assets.

Finally, if you’re looking to get a $60k business loan from a traditional lender, like a bank or credit union, you’ll need a personal credit score above 650 and proof that your business generates sufficient revenue. Also, your business should be older than two years, but lenders tend to be flexible on this point.

Merchant Cash Advance

A merchant cash advance (MCA) is an alternative financing solution that’s great if you need fast cash that’s relatively easy to secure. Unlike traditional lenders, MCA lenders won’t put a lot of stock in your personal and business credit scores. Instead, they’ll want to see that your business consistently does considerable volume in card sales.

If your card sales history looks good, getting an MCA won’t be too difficult. But before you apply for this kind of financing, you should know that it can be expensive and difficult to manage.

With an MCA, there’s no interest rate. Instead, you pay a factor rate of anywhere between 1.1-1.5. For example, if you secure a $60k merchant cash advance, and your factor rate is 1.4, you’ll owe $84,000. Also, you’ll have to start making repayments soon after you get the funds, and you may have to pay on a weekly, bi-weekly, or monthly basis.

Regarding the size of repayments, these can be a fixed size or a percentage of card sales over a given period, otherwise known as a holdback. If you choose percentage repayments, how much you pay from period to period could fluctuate widely, which can be challenging to keep up with.

For most lenders, you’ll likely have to sign a personal guarantee to secure an MCA. This way, if your business stops making payments because it’s no longer generating revenue, the lender can seize and sell your personal assets to offset their loss on the MCA.

An MCA is an attractive alternative financing solution because:

• You can get funded within 24-48.
• Having bad credit doesn’t matter quite as much.

The downsides include:

• You’ll have to start making repayments immediately.
• Making repayments won’t boost your credit score.
• Borrowing fees can be especially high because MCAs are not subject to usury laws.

Invoice Factoring

If your company does invoicing, you can use invoice factoring to get capital quickly. Here’s how it works:

You sell your unpaid invoices to a factoring company at a discount. In most cases, you’ll get 85%-90% of an invoice’s value from a factoring company. Next, the factoring company will have to collect the full invoice amount from your client. Once they get paid, they’ll send the remaining 10%-15% of the invoice’s value, minus fees, to you.

Factor companies charge a range of fees for their services, which usually amount to 1-10% of the full invoice amount. If your client takes longer to pay, borrowing from a factoring company will be more costly.

However, if you’ve agreed to non-recourse factoring, you won’t be on the hook if your customer fails to pay the factoring company. This kind of invoice factoring is uncommon and expensive, mainly because there’s greater risk for the factoring company.

The standard agreement, known as recourse factoring, is less risky for the factoring company because the borrower has to give back what they were paid in the event of a client not paying.

Invoice factoring is great for businesses that need money fast and don’t want to put up collateral, but there are some downsides. For example, your relationships with customers may suffer if you sell your invoices to an aggressive factoring company.

Equipment Financing

Equipment financing is very similar to auto financing in that the loan is secured by the equipment purchased with the funds. This means you won’t own the equipment until the loan is paid off.

Also, you may need to sign a personal guarantee to secure equipment financing because if the lender has to repossess and sell equipment, they won’t be able to get enough to cover the original loan amount, meaning you’ll have to make up the difference.

Your equipment loan’s interest rate is determined by a range of factors, including your business’ creditworthiness, its financials, the loan term, the type of equipment you’re purchasing, and the current cost of credit. Most borrowers can secure an interest rate between 7% and 20%.

The average equipment loan has a term of 10-20 years but it will depend on the type of equipment. To secure this kind of financing, you’ll need to prove that the equipment you intend to purchase has a useful life greater than 10 years.

You could use the funds from a conventional term loan to purchase new equipment, but you’d have to put up collateral to secure one. Also, the terms you can get on an equipment loan are usually more attractive than conventional business loan terms.

How to Secure a $60k Business Loan (Step by Step)

1. Choose the Financing Option That’s Best for Your Business

Before you start comparing lenders, you need to establish which kind of financing will be best for your business. To do this, determine what you need the financing for. Once you know how the loan will be used, selecting a type of financing is quite easy.

For example, if you need $60k to purchase additional commercial space, a term loan or an SBA loan may work out well. Just remember it could take 1-3 months to secure funding from the SBA.

If you need funds fast to meet upcoming obligations, and higher borrowing costs aren’t a problem, consider a merchant cash advance or invoice factoring. 

Finally, if you’re going to be using the money to purchase a company truck or shop machinery, equipment financing might be your best option.

2. Assess Your Business’ Creditworthiness and Financials

It’s important to be honest with yourself about your business’ creditworthiness and finances. If you’re not, you risk submitting an application with a lender that won’t approve and waste time.

First, determine what your personal and business credit scores are. With a personal credit score above 650, and an Experian business credit score above 76, you should be able to secure any of the types of financing we discussed above.

Next, look at your income and P&L statements to determine how much revenue you’ve generated and what portion of it was profit. Now look out into the future and consider obstacles that might pop up suddenly and keep you from making repayments on time.

Once you understand your business’ creditworthiness and financials, you’ll know which lenders are likely to approve your financing.

3. Compare Lenders

Researching and comparing lenders is an important part of the process. If you don’t take the time to research and compare your options, you may miss the best deal that’s currently available.

When you’re researching and comparing lenders, pay attention to approval requirements, interest rates, loan terms, incentives/perks, and fees. Also, look for signals that indicate flexibility, as having a flexible lender can be a significant advantage if unexpected obstacles prevent you from being able to make repayments at some point.

4. Gather Required Documentation for Your Application

It’s critical that you gather all the required business and financial documents before you submit an application. This way you don’t delay the review process. If you’re not sure what’s required, ask the lender; as it’s free and it won’t impact your credit score.

Also, gathering supplementary materials that aren’t required is a good idea. If your lender asks for these while reviewing your application, you can submit them immediately and prevent the process from being delayed.

Here are some of the documents that lenders ask for:

• Personal and business credit reports
• Income and P&L statements
• Balance sheets
• Financial projections
• Business plans
• Personal and business tax returns
• Contracts and legal agreements
• Business licenses
• Commercial leases
• Proof of appraised collateral

If you don’t already work with a certified public accountant (CPA), consider hiring one to prepare these documents. A CPA will ensure all required documents are detailed, accurate, and neat, so you won’t have to worry about getting denied because of inaccurate or incomplete documents.

5. Submit Your Application

Once all your business and financial documents are ready, fill out an application with the lender you’ve chosen. Most loan applications are submitted online, but you may be able to submit one in person or over the phone. However, it’s best to choose the lender’s preferred means of submission so you don’t unnecessarily delay the review process.

6. Review and Sign the Loan Agreement

Once your application has been approved, you’ll receive a loan agreement. It’s important to thoroughly review this document at least twice before signing.

If anything is unclear, ask the lender for clarification. If you still have questions after speaking with them, consider hiring a business attorney who specializes in loan agreements. They’ll help you make sense of the agreement and point out any red flags.

Once you know the agreement is exactly what you’re looking for, sign it. Upon receiving confirmation that you’ve signed, the lender will begin the disbursement process. Depending on the lender you chose, it could take 2-14 days to get the financing in your business bank account.

Can You Get a $60k Business Loan With Bad Credit?

It’s possible to get a $60,000 business loan with bad credit, but you should expect higher borrowing costs and stricter loan terms if you apply for financing with a personal credit score below 680 and a business credit score between 50 and 79.

Traditional lenders usually avoid lending to businesses with bad credit because they see doing so as especially risky. But if the SBA is willing to guarantee a significant portion of the loan, a lender will be more open to letting you borrow their money. Just remember that securing an SBA loan with bad credit may saddle you with a higher interest rate and an inflexible repayment schedule.

If you want to avoid traditional lenders and the SBA, you could get funding from an online lender with a personal credit score as low as 550, but this may be an expensive option too.

Additionally, you could get funding from a non-traditional lender that’s willing to overlook a bad credit score, but you’ll need to show that your business generates sufficient revenue. A non-traditional lender will want to see monthly, quarterly, or annual income statements, and they’ll also want to look at your profit-and-loss (P&L) statements.

For example, if you apply for a merchant cash advance, the lender you’ve chosen will care more about your card sales history than your credit score.

Finally, if you want to secure a business loan but your credit isn’t in great shape, consider bringing on a cosigner with impeccable credit. Even traditional lenders might give you a shot if you have a cosigner because they’ll be able to pursue the money they’re owed from the cosigner if you default.

Can You Get a $60k Business Loan With Limited History?

Like bad credit, limited business history can make securing a loan more challenging. However, limited business history is easier to overlook for most lenders, mainly because many new businesses start making money hand over fist right away.

Business history is important to lenders because time in business has a lot to do with a company’s ability to generate revenue and profit. In most cases, it takes a while for a new business to generate consistent revenue and profit, as they need time to develop relationships with clients and establish a foothold in the marketplace.

So if your business has been operating for less than two years, and you can’t show consistent revenue and profit, securing financing will be harder because you can’t prove that your business is likely to be a profitable investment for the lender.

For most new businesses, the majority of lenders want to see consistent revenue over 6-12 months. If you can show this through income and P&L statements, your business’ limited history shouldn’t prevent you from securing financing.

Final Thoughts

If you need a $60k business loan, there are plenty of options. You can get a term loan, an SBA loan, a merchant cash advance, invoice factoring, or an equipment loan.

Before you decide on a type of financing, determine why you need a $60k business loan, and then consider your business’ creditworthiness, its financials, and your ability to make repayments later on.

Once you’ve landed on which type of financing is best, find a lender and submit your application. Some types of financing can deliver your funds within a few days or less allowing you to grow your business.

Ready to secure business financing? Get in touch with Llama Loan today!