Getting a small-business loan can be a time-consuming process. By knowing lenders' typical business loan requirements ahead of time, you can avoid potential frustration.
Here are seven things lenders generally look at to decide whether you qualify for a loan.
How much do you need? See Your Loan Options with Fundera by NerdWallet We’ll start with a brief questionnaire to better understand the unique needs of your business. Once we uncover your personalized matches, our team will consult you on the process moving forward.
1. Personal and business credit scores
You’ll likely need good personal credit or excellent business credit to qualify for a government-backed SBA loan or traditional bank small-business loan . Online lenders may be more lenient with credit scores, emphasizing your business’s cash flow and track record instead.
Personal credit scores indicate your ability to repay personal debts, such as credit cards, car loans and a mortgage. Small-business lenders require a personal credit score because they want to see how you manage debt.
FICO scores, commonly used in lending decisions, range from 300 to 850 (the higher, the better). You can get a free credit score on NerdWallet and a free copy of your credit reports at
Fast ways to improve your personal credit include disputing any inaccuracies in your report and paying bills on time and in full.
More-established companies will have business credit scores (which generally range from 0 or 1 to 100) with credit bureaus such as Experian, Equifax and Dun & Bradstreet. Steps to building business credit include establishing trade lines and keeping public records clean.
2. Annual revenue
Many lenders will only consider businesses that bring in at least a minimum monthly or annual revenue. How much cash flow you’ll need depends on the lender — for example, online lender OnDeck requires $100,000 in annual revenue to qualify for its line of credit, while Bank of America’s minimum is $250,000.
If you need a business loan with low revenue , you’ll likely have to rely on alternative financing options, like invoice factoring.
3. Years in business
To qualify for a business loan from a bank, you’ll typically need to have been in business for at least two years. Online business loans tend to have less stringent requirements, but still usually require at least six months in business.
4. Business industry and size
Government-backed loans from the U.S. Small Business Administration come with specific requirements. If you want to qualify for SBA loans , you’ll need to check a few additional boxes::
Your business must meet the SBA's definition of a "small" business, which varies by industry. You can find yours on the SBA’s website here
You must be a for-profit company.
You can’t operate in an ineligible industry, like real estate investing, gambling or religious activities.
You must be current on all government loans with no past defaults — you’ll be disqualified if you’ve been late on a federal student loan or government-backed mortgage, for instance.
» MORE: Learn more about Learn more about SBA loan requirements
Non-SBA lenders may decline to lend to you based on factors like the industry you operate in, too.
5. Business plan and loan proposal
Lenders will want to know how you plan to use the money and see that you have a strong ability to repay. They may require a business plan that explains what your business goals are and how you plan to reach them. Some lenders may also ask for a business loan proposal , which details the purpose of the loan and how you expect to repay it.
These documents should clearly demonstrate that you will have enough cash flow to cover ongoing business expenses and the new loan payments. This can give the lender more confidence in your business, increasing your chances at loan approval.
Use NerdWallet’s business loan calculator to estimate your monthly loan payments:
Calculate estimated payments, then see if you qualify for a business loan Loan amount $ Loan term (months) Annual percentage rate (APR) 1 % Not sure? See estimate rates on See estimate rates on online business loans and SBA loans Calculate Get personalized small-business loan rates to compare compare business loans with Fundera by NerdWallet
6. Collateral or personal guarantee
To qualify for a small-business loan, you may have to provide collateral to back the loan. Business collateral is an asset, such as equipment, real estate or inventory, that can be seized and sold by the lender if you can’t make your payments. It’s a way lenders can recover their money if your business fails.
For example, SBA 7(a) loans above $25,000 require collateral, plus a personal guarantee from every owner of 20% or more of the business. A business loan personal guarantee requires you to repay the amount owed from your own assets if the business can’t.
Some lenders offer unsecured business loans , which don’t require collateral but will likely still come with a personal guarantee. Lenders may also take a blanket lien on your business assets — essentially another form of collateral — giving the lender the right to take business assets (real estate, inventory, equipment) to recoup an unpaid loan.
Each lender has its own rules, so ask questions if you're unsure what's required.
7. Business and financial documentation
Banks and other traditional lenders typically require a wide range of paperwork when you apply for a small-business loan . The financial and legal documents you may need for a small-business loan include:
Personal and business income tax returns.
Balance sheet and income statement.
Personal and business bank statements.
A photo of your driver’s license.
Commercial leases.
Business licenses.
Articles of incorporation.
A resume that shows relevant management or business experience.
Financial projections if you have a limited operating history.
Online lenders may provide a streamlined application process with fewer documents and faster underwriting.
If it’s time to expand your business, you’ll need access to working capital to pay for new employees, office space, materials, equipment, marketing, and more. Not every aspiring business owner has the savings to get up and running. This is where business loans come in.
But like most good things, business loans don’t come easily. Unlike a personal loan, they involve more risk for the lender, resulting in stricter eligibility requirements. While many business owners want to obtain a business loan, they may be unsure if they meet the requirements. It doesn’t help that the internet is flooded with an overwhelming amount of information on small-business loan requirements.
To cut through the noise and help you secure financing for your business, we’ve combed through all the loan application requirements for business loans so you don’t have to.
Once you’ve finished writing a business plan with financial projections and ensured fiscal responsibility, it’s time to get funded. (Remember, success is in the details.)
When considering a borrower, lenders primarily look at six different aspects of the borrower’s profile—and they may set a minimum requirement for each. Baseline small-business loan requirements typically include a good credit rating and an annual income of at least $20,000 (if you’re new in the business, some lenders will go as low as $10,000). However, since exact requirements vary from lender to lender, we’ve reviewed an assortment of lenders who can work around your unique needs.
When it comes to applying for a business loan, it's best to apply for one before you need it. But you have to come to your loan application meeting ready—many company owners are not able to meet business loan requirements when they need cash because they haven't prepared.
You should assemble the documents and other information necessary to qualify for a business loan well before you step into an office. And you should at least know what the lender's specific guidelines are before you need capital.
Interested in learning how to qualify for a business loan? You'll need to have the following documents and information on hand.
1. Credit Score
Most lenders believe that past results reflect what will happen in the future. They rely on personal and business credit scores to reveal this information. One of the first business loan requirements is for both the company and the owner to have great credit scores. The lower the credit score, the higher the perceived risk, according to the lender. (For companies, excellent scores are above 80. For business owners, good personal credit scores are above 750.)
You can obtain your personal credit reports at no charge once a year at and dispute any inaccuracies you find through any of the credit bureaus' websites. Businesses can check their scores at three business credit bureaus: Experian, Equifax and Dun & Bradstreet, but in each case, will need to pay a fee to see the full version of the report.
Over time, you can improve your personal credit score by paying all your bills on time and having a low personal debt to credit ratio. Businesses can improve their scores by keeping their data current and adding more vendor relationships to their credit record.
2. Annual Revenue
One of the chief business loan requirements for a lender is a clear picture of the trends in your business, especially how sales and cash flow have grown.
Make sure you have accurate monthly financial statements from the past two years on hand. They will look at specific metrics like the current ratio, which is your current assets divided by current liabilities. (If that ratio is greater than one, it signals your company's ability to pay all its bills.)
Many lenders will also ask for copies of your bank account transactions so they can confirm cash flows that are reflected on your financial statements. Remember, the qualifications for a business loan depend more on growth in cash flow and less on revenue.
3. Updated Business Plan
Lenders want to know how the loan will be used and how the company plans to grow. You should be able to thoroughly discuss the age and stability of your company in its industry. Be ready to share an up-to-date copy of your business plan, which includes projected financial statements and a plan for how you will pay the money back.
Don't forget to include the resumes of key managers in your company and how they will make a difference. Even with all the financial numbers and documents, one of the critical business loan requirements is proof that the people who help operate your business have the relevant experience and credentials to repay the loan.
4. Additional Collateral
Every lending source wants to reduce their risk when making a loan. One of the ways they do this is by getting additional financial collateral that secures the loan in case your business fails to meet its repayments. This is usually done in the form of a company's accounts receivable, equipment or any other easy-to-sell assets.
One of the additional qualifications for a business loan may be for the company's owner to provide a personal guarantee to their loan, or pledge additional collateral such as personal real estate or other financial resources.
Credit scores, annual revenue, business plan and collateral are the four cornerstones of most business loan applications. But note that there are many other supporting documents you'll need to qualify for a business loan. They can include:
your driver's license
any commercial leases
business licenses
personal and business tax returns
business insurance plans
payroll records
incorporation documents
other affiliated corporate ownership or
affiliated corporate ownership or current added financial obligations.
The process of applying for a business loan can reach into nearly every corner of your financial history, personal and business, To avoid the stress of last-minute scrambling, organize the necessary documents ahead of time.
Read more articles on loans.
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A version of this article was originally published on December 2, 2019