Camino Financial Team: How do Camino Financial Business Loans Work?
Camino Financial
By: camino-financial
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How Do Business Loans Work?

Understanding how business loans work will help you choose the best option to finance your business.

You’ll find answers to all your questions, how to apply, what the requirements are, which is the best choice for business owners, pros and cons, and all you need to make an informed decision.

Keep reading if you’re ready to learn everything you need to know about getting capital to grow your company.

We also present Camino Financial microloans, an amazing funding alternative!

Table of Contents
1. What is a business loan?
2. What can a business loan be used for?
3. Pros and cons of small business loans
4. Types of small business loans
5. Business loan requirements
6. How the business loan application process works
7. Tips to qualify for a small business loan
8. Where to get a small business loan
9. How to choose a business loan that works for you
10. Camino Financial business loans
11. FAQs

What Is a Business Loan?

A business loan is a type of financing that traditional such as banks, credit unions, and online lenders can offer you to grow your business.

You can use the funds to expand, purchase new equipment or inventory, hire new employees, and more.

Some examples of commercial loans are business lines of credit, term loans, equipment leasing, and invoice financing

How Does a Business Loan Work?

A loan is a contract between a borrower and a lender in which the borrower receives money or something of value from the lender in exchange for a promise to repay the money or its equivalent later.

A business loan is a loan specifically intended for business purposes. You borrow a certain amount of money from a lender, and then you use that money to finance your business.

As with all loans, it involves the creation of a debt, which you will repay with interest.

Banks and other financial institutions offer this type of loan.

Business loans can be secured and unsecured. Secured loans require applicants to provide collateral or a personal guarantee to receive the loan. Unsecured loans don’t.

However, unsecured loans typically come with higher interest rates than secured loans.

How Much Can I Get With A Business Loan?

Small business loans typically range from $5,000 to $500,000. The average loan size is around $50,000.

However, the answer depends on several factors, including the financial health of your business, your personal credit history, and the amount of collateral you have to put up.

Here’s a look at some of the things lenders will consider when determining how much money to lend you:

The Strength of Your Business

Lenders will want to see that your business is doing well and has a strong chance of success.

They’ll look at your financial statements, business plan, and other factors to determine whether or not your business is a good risk.

Your Personal Credit Score

Even if your business is doing well, you may not be able to get a loan if you have bad personal credit.

That’s because lenders see you as a higher risk if you have a history of not paying your debts on time.

The Amount of Collateral You Have to Put Up

Collateral is something of value that you can use to secure a loan.

If you don’t have any collateral, or if your collateral isn’t worth very much, you may not be able to get as much money as you want.

Collateral only applies to secured loans.

How Do Repayment Terms Work?

Small loans for businesses come with a variety of repayment terms, depending on the type of loan and the lender.

However, most of them require monthly repayments, similar to a mortgage or car loan.

The repayment schedule will be determined when you take out the loan and will be based on factors such as the loan amount, interest rate, and repayment term.

Once you have agreed to the repayment schedule, it is important to stick to it to avoid any penalties or additional fees.

If you are struggling to make repayments on your business loan, it is important to contact your lender as soon as possible.

Apply for a business loan today

What Can a Business Loan Be Used For?

Small business loan uses vary from business owner to other. However, some of the more common uses include:

  • Working capital is the money used to fund a business’s day-to-day operations. You can use it to pay for inventory, salaries, and other operational expenses.
  • Expansion – You can use a business loan to finance a business’s expansion. This could include things like opening new locations, adding new products or services, or increasing marketing efforts.
  • Equipment – Businesses often need to purchase new equipment as they expand or grow. You can use it to finance the purchase of this equipment.
  • Real estate – You can finance the purchase of the real estate. This could include office space, retail space, or other property types.
  • Start-up costs – Finance the start-up costs associated with starting a new business. This includes things like licenses, permits, and other initial expenses.

There are many other uses for business loans as well. These are just some of the more common ones.

Pros and Cons of Small Business Loans

There are a few key pros and cons to think about when taking out commercial loans. Here are the most important to consider.


Helps With Cash Flow

A business loan can provide a much-needed financial boost to keep your business afloat during tough times.

By taking out a loan, you can free up some of your own personal funds or business revenue that you can use for other purposes.

Builds Credit

Paying back a business loan on time can help build your company’s credit score, which can be beneficial in the long run when you need to take out another loan or secure funding from investors.

Gives You Access to Capital

Starting out can be difficult to get approved for a traditional bank loan.

Business loans from online lenders are often easier to qualify for, giving you much-needed access to capital.

Offers Flexibility

Many online lenders offer flexible repayment terms, so you can choose a repayment plan that works best for your business.

This can be helpful if you have fluctuating or seasonal income.


High-Interest Rates

The biggest downside of commercial loans is the high-interest rates.

Lenders consider businesses at higher risk than individuals, so they charge higher rates to offset that risk.

Short Repayment Terms

Business loans also have shorter repayment terms than personal loans, which means you’ll need to pay back the loan much faster.

This can be difficult if you don’t have a steady income stream.

Requires Collateral

Many business loans require collateral, such as your personal home or business asset.

If you default on the loan, the lender can seize your assets to recoup their losses.

It May Affect Personal Credit

If you take out a business loan in your name, it can affect your personal credit score.

This is because the loan will show up on your personal credit report.

Types of Small Business Loans

Many types of small business loans are available to entrepreneurs and small business owners. The most common types of loans include:

  • SBA loans are government-backed loans that are available through participating lenders.
  • Invoice factoring is a type of financing that allows you to sell your invoices at a discount to get immediate cash.
  • A merchant cash advance is a type of financing that allows you to borrow money against your future credit card sales.
  • A business line of credit is a type of loan that allows you to borrow money up to a certain credit limit. Once you have repaid the borrowed funds, you can borrow again up to the original limit.
  • A term loan is a type of loan that is typically used for a specific purpose, such as expanding your business or purchasing equipment. These loans are typically repaid over a set period of time, with interest accruing on the outstanding balance.
  • A working capital loan is a type of loan used to finance your business’s day-to-day operations.
  • Accounts receivable financing is a type of loan that allows you to borrow money against your outstanding invoices.

There are many other uses for commercial loans as well. These are just some of the more common ones.

Business Loan Requirements

If you’re looking for a business loan, it’s important to know what lenders are looking for.

Here are some of the most common business loan requirements:

A track record of success

Lenders prefer to lend to businesses with a proven track record of success.

They’ll want to see financial statements, tax returns, and other documentation showing the business is profitable and has a growth history.


Many lenders will require collateral, such as real estate or equipment, to secure the loan.

This allows the lender to recoup their losses if the borrower defaults on the loan.

If you don’t want to put up collateral (or don’t have any), apply for an unsecured loan.

A good credit score

Lenders will pull the borrower’s personal and business credit reports to assess their creditworthiness.

They’ll want to see a strong or a minimum credit score with no late payments or other red flags.

A manageable debt-to-income ratio

Lenders will calculate the borrower’s debt-to-income ratio to determine how much they can afford to borrow.

They’ll typically look for a ratio of 40% or less, which means that no more than 40% of the borrower’s income should go towards debts (including the new loan payment).

A strong business plan

In some cases, lenders will want to see a well-thought-out business plan demonstrating an understanding of the market, the competition, and how the borrower plans to generate revenue.

How the Business Loan Application Process Works

By understanding the process and knowing what to expect, you can make the process go smoothly and increase your chances of getting approved for business financing.


The first step in applying for a business loan is to gather the necessary paperwork.

This will vary depending on the lender, but you will typically need to provide financial statements, tax returns, and other documents.

Once you have all of the required documentation, you can begin filling out the loan application.

Loan Application

The loan application will ask for basic information about your business, such as the name, address, and contact information.

You will also need to provide financial information, such as your revenue and expenses.

The lender will use this information to determine whether you are a good candidate for a loan and how much money they are willing to lend you.

Submit Your Application

Once you submit your loan application, the lender will review it and decide. If the lender approves you, you will receive the loan proceeds and can begin using them to grow your business.

If you are not approved, the lender will provide you with feedback on why your application was not approved and what you can do to improve your chances of getting approved in the future.

Apply for a business loan today

Tips to Qualify for a Small Business Loan

Following these tips can increase your chances of a lender approving you for a small business loan.

  1. Make sure you have a well-written business plan outlining your company’s goals and how you plan to achieve them. Your business plan should also include financial projections for the next few years.
  2. Have a strong personal or business credit score. Lenders will pull your personal credit report when you apply for a business loan, so make sure there are no red flags on your report that could hurt your chances of approval.
  3. Have collateral to offer as security for the loan. This could be in the form of property, equipment, or inventory.
  4. Be prepared to answer questions about your business and why you need the loan. Lenders will want to know how you plan to use the loan proceeds and your repayment plans.

Where to Get a Small Business Loan

If you’re looking to get a small business loan, there are a few different places you can go.

Banks, credit unions, or the Small Business Administration (SBA) are the most common options. However, there are also online lenders and alternative lenders that may be a good fit for your business.


Banks are one of the most common places to get a small business loan. They typically have the lowest interest rates and longest repayment terms.

However, they also usually have the strictest eligibility requirements.

Credit Unions

They often have more flexible eligibility requirements than banks and may offer lower interest rates.

However, credit unions typically have shorter repayment terms than banks.

Small Business Administration

The SBA doesn’t lend money directly to businesses, but they do guarantee loans from participating lenders.

This can make it easier for businesses to get approved for a loan.

Online Lenders

They typically have lower interest rates than banks and credit unions but have shorter repayment terms.

An online lender can be a good option for businesses that don’t qualify for traditional loans.

Alternative Lenders

Alternative lenders typically have higher interest rates than banks and credit unions, but they also have more flexible eligibility requirements.

How to Choose a Business Loan That Works For You

There are a few things you need to take into account when choosing a business loan.

  • Figure out how much money you need to borrow. This will help you narrow down your options and choose a loan that is right for you.
  • Consider the interest rate. You want to find a loan with a low-interest rate so you can save money on the amount you borrowed.
  • Repayment terms. You want to find a loan with terms that are manageable for you. You don’t want to be stuck with a loan that has a long repayment period and high-interest rates.
  • Fees or charges associated with the loan. Some loans have origination fees, closing costs, or other charges that can add up. You want to find a loan with low fees, so you don’t have to pay more than you have to.

Now you understand how business loans work; you can choose the right loan for you. When you consider all of these factors, you can be sure to find the best small business lenders that work for you.

Camino Financial Business Loans

At Camino Financial, we offer borrowers two different products: Microloans and Small Business Loans. Learn below their features.


This credit model is for “cash-heavy” and informally run microenterprises.

  • Loan Size Range: $5,100 to $35,000
  • Loans Best Used For: Working capital and equipment purchases
  • Term: 24 to 36 months
  • Closing Fee: 6.99%. No other fees are charged.
  • Payment Frequency: Monthly payments

Small Business Loans

  • Loan Size Range: $5,000 to $150,000
  • Loans Best Used For: working capital, equipment purchases, improvements, etc.
  • Term: 24-60 months
  • Closing Fee: 5% of the loan amount. No other fees are charged.
  • Payment Frequency: Monthly payments

Our Business Loan Requirements

Camino Financial small business loans are more flexible in their requirements as compared to traditional bank loans.

When we evaluate your application, we mainly consider your personal credit and the global cash flows of your business.

  • Restricted industries include real estate investing, financial investing, car dealerships, and adult entertainment
  • Annual sales of your business: $30,000
  • Your businesses must have been active and registered for at least 9 months
  • No bankruptcies in the last 12 months
  • You must be current with creditors and have no past due payments on any existing debt obligation
  • You must own at least 20% of the business


  •    Your most recent business and personal tax returns (only for loans of 50K or above)
  •   Proof of business registration and business license

With Camino Financial, you can submit all documents electronically. You don’t need to visit a branch bank, print documents, or send faxes, which makes our loan process very convenient.


Applicants must give Camino Financial permission to check business banking activity and download the last 6 months of bank transactions.

We use a third-party provider called PLAID. If you’re hesitant about this step, please know that PLAID is a well-known company trusted by hundreds of other banks and companies.

We assure you that processing is secure and private.

Using Plaid, Camino Financial doesn’t have access to your login information or online account.

This step is necessary for Camino Financial to calculate your business income.

Likewise, by reviewing your financial information, we’re able to provide a final loan amount that you can pay back comfortably.

We can offer a competitive term loan at a competitive rate.

Benefits of Getting a Small Business Loan With Camino Financial

Are you still not convinced that Camino Financial is your BEST funding alternative? Check out these amazing perks:


Our online loan process is easy, convenient, and takes place from beginning to end online, so you can explore funding options from the comfort of your home or workplace.

Quick-Turnaround Processing

When you apply for one of our small business loans, you receive an instant quote.

Freedom and Flexibility to Use Funds

You can use funds for most business needs. From hiring more staff to buying equipment or renewing your front store.

You can even use the funds to pay off personal loans or credit cards you’ve used for business purposes or to purchase a second business.

Camino Financial has limited restrictions on fund usage.

No Collateral Needed

Our small business loans are unsecured.

That means you don’t need to use your equipment, any business or personal property, and other types of collateral to receive approval for commercial loans.

We do require a personal guarantee for some loans.


After just 12 months of making timely payments, you can graduate. This is only for members with a business license, and other terms may apply.

Fixed Terms

You know exactly what you pay each month because the annual interest rate and the monthly payment stay the same. They never change. That way, you can avoid surprises and stay on top of your payments.

Pay Off Loan Early

As your business prospers, you may decide to pay off your small business loan early.

There are no prepayment penalties when paying off the loan in full before the loan term ends.

No SSN Required

Again, we understand you may not have a Social Security Number. We are one of the few lenders accepting applicants with only an ITIN (if they have no SSN).

3 Easy Steps to Get a Loan with Camino Financial

This is the simple and quick process you’ll follow to obtain a business loan from Camino Financial.

The whole process can take only from 2 to 10 business days:

Submit an Online Application

You can complete the mobile-friendly application in 15 minutes.

You don’t need to submit documents, and applying does not affect your credit score.

Review Pre-qualified Terms

If pre-qualified, you’ll receive information about the terms of the prospective loan.

A loan specialist will call you to answer your questions and may ask for additional documentation or requirements, a well a your permission to download the last months of your business bank activity.

Sign Loan Contract and Receive Your Funds

Once approved, we send a loan contract by email.

Once you sign the contract, you receive funds deposited electronically to your bank account.

Before filling out the application, we invite you to use our business loan calculator.

This excellent tool allows you to calculate your monthly payments, the amount you’ll pay in interest, and the total price of your loan.

That way, you can make an informed decision before submitting your application.

Simply use the calculator to input different figures and scenarios until you arrive at the numbers and terms you’re most comfortable with.

Are You Ready for Your Business to Be Successful?

You can make an informed decision now that you know how business loans work. Camino Financial helps small businesses achieve long-term financial success.

We help pave the way for continued business growth by making the loan process simple and easy.

We also have devoted ourselves to offering the best educational resources so you can become the best business owner you can be.

We look forward to helping you; it’s what we do best.

Apply for a business loan today


What is the purpose of a business loan?

The purpose of a business loan is to provide businesses with the financial resources they need to grow their company.

How can I get a loan for a business?

To get a loan for a business, it’s important to have a good credit score, a clear business plan, and to show that you can repay the loan.

Lenders want to know that you have a good chance of making money with your business so that they can be confident they will get their money back.

You should also be prepared to put up some collateral in case you can’t repay the loan.

How much money can a small business loan offer?

It depends on the business and the loan.

Small business loans can range from a few thousand dollars to hundreds of thousands of dollars or more. Generally, smaller loans have higher interest rates and shorter repayment terms than larger loans.

What loans are available for small businesses?

There are a variety of loans available for small businesses, depending on what the business needs.

Some common loans include start-up loans, merchant cash advances, term loans, bridge loans, and lines of credit.

How soon do you have to pay back a business loan?

It depends on the terms of the loan. Generally, depending on the lender, you’ll have a few months to a year to begin paying back the loan.

What is usually required for a business loan?

Business loan qualifications vary depending on the lender, but typically a business will need to show a strong track record of profitability, good credit, and significant collateral.

How much of a loan does my business qualify for?

The amount of financing available to a business will depend on a number of factors, including:

  • the size and age of the business
  • the industry it operates in
  • its credit score and financial history
  • the amount of collateral it can offer

How does an SBA loan work?

The SBA doesn’t actually lend money itself; it partners with banks and other lenders offering SBA-backed loans.

Check if you
qualify for a loan