Business loans provide an essential resource for businesses of all sizes. They can help them manage seasonal fluctuations in revenues or unexpected expenses. You can also use them to purchase new equipment, inventory or to relocate your business. The key is to make use of the funds wisely, so that you can grow your business and avoid relying on debt financing in the future.

Before you apply, consider the amount of capital your business requires and which loan can meet your needs. You must know the duration you plan to pay back the loan because this can affect your interest rates and fees. Many lenders provide a one time funding option or a credit line with terms of repayment that range from one day to several years.

The majority of lenders will require you to provide a variety of documents, including your business plan as well as financial statements and credit history. They may also require collateral such as equipment, real estate or money owed to your company (accounts receivable). Some lenders will waive these requirements for established borrowers, those with stellar credit and those seeking large amounts of capital.

Lenders will also consider whether your business can repay the loan using measures such as its fixed-charge ratio and the amount it will likely to generate every month. They will check whether it has any outstanding debts and evaluate its compliance with all legal requirements. They also will look at the field that you work in to determine if it’s volatile or stable.