Business Loan Criteria – What You Need to Get Approved for a Small Business Loan

Business Loan Criteria – What You Need to Get Approved for a Small Business Loan


Business loan criteriaBusiness loan criteria can vary quite a bit depending on the type of lender you work with to get your small business loan.


Having said that, before you go to all of the trouble of applying for a business loan, you want to make sure you have a good chance of being approved.


Business Loan Criteria – Your Personal Credit Report

Credit scores range from 300 to 850. You, of course, want the highest credit score possible. Even though you are getting a business loan, most lenders unless you are using a lender that lends to those with bad credit will want to see your personal credit score.


It may seem odd that lenders want to see your personal credit score when you are looking to borrow money for your business, but they also want to see how you manage debt in your daily life.


That means if your personal credit score is poor, you won’t be able to get a business loan unless you are willing to pay high-interest rates and deal with a non-traditional lender or online lender that works with bad credit such as AdvanceASAP.


Additional Business Loan Criteria – Your Business Plan

Most banks and some online lenders will want to see your business plan. This will show your potential lender that you have thought through all of the aspects of your business.


While whole books have been written on business plans, so the subject is too big to go into depth here, you will need the following in your plan.


  • A description of your business – This includes what your business does and how you will make money.
  • An executive summary – This is normally one page that summarizes your goals, your revenue model, how you will market the business and your day-to-day business operations.
  • Your competitors – You need to show your lender that you understand your local competition as well as the overall competitive landscape.
  • Your management team – This section will talk about who will actually run your business day in and day out.
  • Your financial data – This is all of that of your financial information such as cash flow projections, sample financial statements, and a break-even analysis.
  • Your investment – You will need to talk about how much money you are actually investing in the business yourself.
  • An expansion of the executive summary – You will also need to write about each of the executive summary sections in more detail.
  • An appendix – If you have information that doesn’t fit in any of the other sections, such as graphs, charts, your company logo, put it here.


Possible Business Loan Criteria – Your Business Credit Report

If you are already in business, your lender will also look at your business credit report.


Typically, you will need a credit score of 650 or higher. If your credit score is 600 or lower, you will need to look for financing somewhere else than your bank.


You can find small business loans online if your credit score doesn’t meet your bank’s business loan criteria. There are plenty of options such as OnDeck, Kabbage, Lendio, Able Lending, and Leads Gate.


Even More Financial Information to Meet Business Loan Criteria

In addition to the above, you will also need to be up today and have available your personal income tax returns. You will need at least three years worth of returns to meet the bank’s criteria.


These are especially important if you are starting a new business as you won’t have any business returns to offer.


Also, if you do have an established business, be prepared to get your lender copies of your profit and loss statement, your cash flow statement, and your balance sheet as well as one year’s worth of business and personal bank statements.


Miscellaneous Business Loan Criteria

Depending on the bank, you may be required to have some type of collateral. This is especially true if your bank feels your loan is high risk. This collateral can be either business or personal property, such as your home equity.


Finally, you may be required to submit copies of any legal documents that pertain to your business. These can include the following.


  • Franchise agreements
  • Contacts you have with third parties
  • Articles of incorporation
  • Business licenses


All of these business loan criteria are pretty standard for traditional banks and credit unions regardless of whether they are your small local bank or a large national bank.


In fact, most banks shy away from giving business loans to startup companies as they see them as being too risky.


That doesn’t mean that if you are a startup or have a less than great credit history you can’t get a small business loan. It simply means you are going to have to look to alternative lenders.


These can be microlenders, cash advance lenders, as well as online lenders.


The bottom line is this. If you want to go through a traditional bank or credit union to get a small business loan, make sure you can provide them will all of the information mentioned and that your credit score is in good shape, and you have collateral.


If you can meet all of these business loan criteria, then you should be approved and at a great interest rate to boot.


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