BusinessBeginnerPreview
Small Business Lending & Loans
A practical, lender's-eye guide to small business debt financing. You will learn the real products, the underwriting math, and how to assemble an application that gets a yes.
Small business owners and founders who need outside capital and want to borrow on the best possible terms.
Course content
Workbook & downloads
Put the course into practice — a printable workbook plus editable templates you can fill in and reuse.
Preview the workbook
This workbook turns the course into a loan-ready application. Work through it in order: you will assess yourself the way a lender will, calculate the exact numbers underwriters use, choose the right product, and assemble a package that earns a yes. Use the templates to build your debt schedule, DSCR model, lender comparison, and use-of-funds statement.
How Lenders Think: The Credit Decision
Pre-qualify yourself against the 5 Cs and the ratios before any lender does.
Worksheet: Your 5 Cs Self-Assessment
Fill in honest numbers and notes for each of the 5 Cs. Anything weak here is a likely reason for decline; flag it now so you can fix it before applying.
- Character: Personal FICO score
- Character: Years in business
- Character: Any liens, judgments, or bankruptcies (Y/N + details)
- Character: Business credit (PAYDEX / Experian Intelliscore)
- Capacity: Calculated DSCR (from the model template)
- Capital: Equity injection you can contribute (dollars and % of project)
- Collateral: Assets available to pledge (type and estimated value)
- Conditions: Loan purpose in one sentence
- Conditions: Industry risk notes (seasonality, competition)
Exercise: Calculate Your DSCR
Using your most recent tax return or P and L, work the DSCR formula step by step. Then test it against a target loan amount. Aim for 1.25 or higher.
- Start with net income, then add back depreciation, interest expense, and (if applicable) owner salary. What is your adjusted Net Operating Income?
- Estimate the annual debt service on the loan you want (use an online loan calculator: amount, rate, term).
- Divide NOI by total annual debt service. What is your DSCR, and is it at or above 1.25?
- If it is below 1.25, which lever fixes it fastest: borrow less, extend the term, or grow cash flow? Write your plan.
Checklist: Credit Clean-Up Before You Apply
- Pull all 3 personal bureau reports free at AnnualCreditReport.com
- Pull business reports: Dun & Bradstreet, Experian Business, Equifax Business
- Dispute any errors in writing and track resolution
- Pay revolving balances below 30% of limits before the application
- Resolve or set a documented payment plan for any tax liens or collections
- Open or confirm 2-3 net-30 vendor accounts that report (e.g., Uline, Quill, Grainger)
- Confirm you have a D-U-N-S number and an active PAYDEX score
The Loan Product Menu: Term Loans and Lines of Credit
Match the product and the channel to your actual need and timeline.
Exercise: Term Loan vs. Line of Credit Decision
Diagnose what kind of capital you truly need. Term loans buy things; lines of credit handle timing. Answer for your specific situation.
- Is your need a one-time, defined purchase (renovation, acquisition, equipment) or a recurring cash-flow gap (payroll, seasonal inventory)?
- If recurring, how many times per year would you draw and repay? Does a revolving line fit better than a lump sum?
- What is the useful life of what you are funding, and does your proposed term match it?
- Could you open a line of credit now, while financials are strong, as insurance for later?
Worksheet: Lender Channel Shortlist
List specific lenders in each channel you will approach, in tier order from cheapest to fastest. Apply top-down.
- Tier 1 bank/credit union #1 (name, relationship Y/N, est. rate)
- Tier 1 bank/credit union #2 (name, relationship Y/N, est. rate)
- CDFI or community lender (name, focus, est. credit minimum)
- Online/fintech lender #1 (name, est. APR, funding speed)
- Online/fintech lender #2 (name, est. APR, funding speed)
- My realistic qualification tier (FICO, years in business, revenue)
Checklist: Pick the Right Product
- Confirmed whether I need a term loan (buying) or a line of credit (timing)
- Matched the loan term to the useful life of the asset or need
- Identified secured vs. unsecured options and their rate difference
- Noted any annual cleanup/rest period requirement on a line of credit
- Started at the cheapest channel I can realistically qualify for
- Confirmed where I bank can see my deposit history to de-risk me
SBA Loans and Equipment Financing
Choose the right SBA program or asset-based product for your purpose.
Exercise: Which SBA Program Fits
Use the program-to-purpose logic from the course to select the right SBA path, then identify a lender who can deliver it.
- Is this for owner-occupied real estate or major long-life equipment (favoring 504), flexible-use capital up to $5M (favoring 7(a)), or under $50K for a young business (favoring a Microloan/CDFI)?
- What down payment can you make: 10% (504/established), or 15-20% (startup/special-use)?
- Is your chosen bank an SBA Preferred Lender (PLP)? How many 7(a) loans did they close last year?
- Does your DSCR still clear 1.15+ on the long SBA term you would use?
Worksheet: Equipment Lease-vs-Buy Comparison
Fill in the totals for buying/financing versus each lease option for a specific piece of equipment, then circle the lowest true cost given how long you will use it.
- Equipment description and purchase price
- Expected useful life / years you will actually use it
- Finance/buy: down payment + total of payments + buyout
- Capital lease ($1 buyout): total of payments + buyout
- Operating lease (FMV): total of payments + end-of-term option
- Section 179 / depreciation benefit available (Y/N + est. tax savings)
- Lowest true-cost option for my usage horizon
Checklist: SBA & Equipment Readiness
- Selected the correct SBA program (7(a), 504, or Microloan) for the purpose
- Confirmed eligibility (for-profit, U.S.-based, meets SBA size standards)
- Located an SBA Preferred Lender to shorten approval time
- Prepared the 10% (or 15-20%) equity injection
- Decided lease vs. buy based on the asset's useful life
- Confirmed Section 179 eligibility with my accountant
Getting Approved: The Application, the Offer, the Signature
Assemble the package, compare offers on true cost, and negotiate before signing.
Checklist: Loan Application Package Assembly
- Business + personal tax returns (last 3 years)
- Year-to-date P&L and Balance Sheet (within 60 days)
- Business bank statements (last 3-12 months)
- Personal Financial Statement (SBA Form 413 if applicable)
- Debt schedule for every existing loan (from the template)
- Entity docs: articles, operating agreement/bylaws, licenses, leases
- Use-of-funds statement tying each dollar to a purpose
- Business plan + financial projections (for larger/SBA loans)
- One-page cover memo (amount, purpose, term, DSCR, time in business)
- Reconciled numbers: tax return, P&L, and deposits tell one story
Exercise: Convert Every Offer to True Cost
For each offer, compute the real annualized cost so you compare apples to apples. Convert any factor rate to a total dollar cost and APR.
- For each offer, what is the APR in writing (including origination and fees)?
- If an offer uses a factor rate, multiply: amount x factor = total repayment. What is the dollar cost?
- Annualize that cost over the actual repayment period. What is the effective APR?
- Which offer has the lowest total cost, and does any need for speed justify paying more?
Worksheet: Term Negotiation & Red-Flag Review
Before signing, record the negotiable terms you will push on and screen the contract for traps.
- Rate I will request (and competing offer as leverage)
- Origination fee: current vs. target
- Prepayment penalty: present? Negotiate to none/declining
- Personal guarantee: full / limited / capped / milestone release
- Financial covenants (e.g., min DSCR) I must maintain — can I comply?
- Blanket UCC lien: narrow to specific collateral? (Y/N)
- Red flags present (daily withdrawals, double-dipping, stacking, pressure to sign)
Your Action Plan
- Pull all personal and business credit reports and fix errors at least 60-90 days before applying.
- Calculate your DSCR; if below 1.25, adjust loan size, term, or grow cash flow until it clears.
- Decide whether you need a term loan (buying) or a line of credit (timing), and the right SBA/equipment product.
- Build a tiered lender shortlist and apply cheapest-first (bank/credit union, then CDFI, then online).
- Assemble the full application package and reconcile tax returns, P&L, and bank deposits to one consistent story.
- Write a one-page cover memo framing the request, purpose, term, and your computed DSCR.
- Collect at least two competing offers so you have negotiating leverage.
- Convert every offer to APR and true total cost; convert any factor rate before deciding.
- Negotiate rate, fees, prepayment penalty, personal guarantee, and lien scope before signing.
- Read the full agreement (or have an attorney/accountant review it), confirm covenants are livable, then sign.
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