6 Most Important Business Loan Requirements

Afraid of getting rejected on your business loan application? Meet these requirements and boost your odds of getting approved.

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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.

Business loan requirements

  • Credit. When a small-business owner requests funding, lenders almost always check the owner’s personal credit. So having a good personal credit score is essential. Building great credit for the business itself is also very useful when trying to get a good business loan.
  • Cash flow and income. Lenders look at the debt-to-income ratio of a business when assessing its risk. The higher a business’s cash flow and income, the better its chances of getting a loan.
  • Age of business. New businesses often have difficulty getting funding because most lenders only lend to businesses with a track record of at least two years
  • Current amount of debt. The other part of the debt-to-income ratio is debt. Businesses and borrowers with too much debt will have difficulty getting new loans.
  • Collateral. Lenders view debt backed by things of value as less risky, so collateral-based loans can be easier to get and have lower interest rates.
  • Industry. During the loan approval process, lenders assess the risk of your type of business. Some industries are easier to get loans in than others.
  • Business plan. Though not always required, lenders are more likely to favor applicants who can share exactly how they're going to build their revenue by sharing their strategy and financial projections. 

What is a business loan?

Before we get into what you need to get a business loan, you should probably understand what a business loan really is. Like a regular loan, it is typically repaid with interest over a set period of time, with the terms and interest rate determined by the lender based on factors such as the borrower's creditworthiness and the purpose of the loan. But the loan is used to cover a wide array of different business needs, whether that's equipment, inventory, or just basic working capital. These different needs can sometimes determine the type of loan you'd want to apply for—which we'll get into below. 

Our top-rated lender: Lendio

Lendio partners with over 75 lenders, which improves your odds and efficiency to get the funding you need.


Money Approach

$50k in revenue

Calendar Approach

6 mos. in business

Analysis Approach

560 credit score

Loan types

Before we dive in, let’s clarify the most common types of loans for small business owners. Here’s our quick-and-dirty guide, but you can get more detail on our ultimate small-business loan page.

  • Business lines of credit let you spend up to a certain amount and then only pay interest on the amount you actually spend.
  • Equipment loans help you pay not just for heavy equipment but for any physical asset your business needs as part of its daily operations.
  • Invoice factoring loans (a.k.a. accounts receivable financing) pay you the amount of your outstanding invoices. No more waiting on clients who are slow to pay up—the lender pays you the invoice amount (minus a fee), and then they collect from your clients so you can get back to business as usual.
  • Merchant cash advances trade you a lump sum for a promised percentage of your future sales.
  • Peer-to-peer lending is a relatively new platform that lets you borrow a certain amount of money from a group of investors, usually in an online-only format.
  • SBA-backed loans are endorsed by the U.S. Small Business Administration, making them generally reliable and low-interest loans.
  • Term loans can get you a lump cash sum within 24 hours—with the trade-off of high interest rates.
  • Unsecured business loans are loans that don’t require collateral. Most business credit cards and lines of credit are unsecured loans.
  • Working capital loans give you the funds to pay for daily operations, pay employees, and deal with temporary drops in profit.

A note about term lengths: short-term loans give you money to spend with the expectation that you’ll pay back the total amount, usually within 18 months (though the term depends on the lender—some loans have a longer term limit, some shorter).

Long-term financing is better for long-term investment in your business; while short-term loans can tide you over during a seasonal dip in sales or help you purchase a crucial piece of equipment, long-term financing solutions offer a larger chunk of cash to grow your business and profits.

Small Business Loan Requirements Checklist
Applying for a small-business loan soon?
Our free checklist can help you understand what lenders are looking for.

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1. Credit

For business owners considering a business loan, sky-high interest rates can feel like a punch to the gut. However, the better your credit score, the more likely you’ll get a low rate on a loan.

Remember that lenders look at both personal and business credit scores and history. And because most small-business owners don’t have business credit, personal credit is a vital factor in determining your eligibility. You’ll need a credit score of at least 600 to acquire a business loan in most cases.

Credit score tier information

Credit score tier
FICO credit score

Excellent credit


Good credit


Fair credit


Poor credit


Bad credit

Below 600

Under the Fair Credit Reporting Act, you are entitled to a free annual credit report from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can get all three together or space out your credit report requests over time.

Outside of the major credit bureaus, there are a lot of “free” credit reports and scores floating around. But unfortunately, lenders typically don't use these scores when making credit decisions. We recommend getting a personal FICO credit score, which you’ll have to pay for. The FICO scoring system is used by 90% or more of lenders, so this is the credit score that matters.

If you have a weak credit score and credit history, don’t sweat it too much. There are several types of bad credit loans for borrowers with less-than-stellar credit scores.

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Types of loans at Lendio

Lendio, one of our favorite sources for business loans, requires borrowers to have a credit score of only 560 when applying for certain loans. It’s important to note that a 560 credit score is considered subprime, so most lenders will likely deny funding. But with Lendio, you can still get matched with lenient lenders.

If you have a solid credit score, we recommend the following funding options:

Loan type
Minimum credit score needed
Main borrower requirement
Get a loan

Merchant cash advances


4 to 6 months of financial history

Invoice factoring


Invoices from paying customers

Equipment financing


12 months of business history

Peer-to-peer lending


Assessment by a peer lender, not a bank or the lending marketplace

SBA loans6802 years of business tax returns
Lines of credit560$50,000 in annual revenue
Term loans600Bank or P&L statements as proof of revenue

Data effective 3/24/23. At publishing time, amounts, rates, and requirements are current but are subject to change. Offers may not be available in all areas.

These loans are considered the holy grail of small-business loans thanks to their longer terms, great rates, and lower monthly payments. Mainly, keep an eye out for an SBA lender; loans backed by the U.S. Small Business Administration are easier to qualify for, and they often have low interest rates.

2. Cash flow and annual revenue

Cash flow can make or break your business. A steady and healthy stream of cash shows lenders that you’re capable of sustaining the loan payments. It’s essentially a representation of your business’s health.

In addition to annual revenue, lenders will most likely look at expenses to determine how profitable your business is. So if you’re new to business or lack sufficient cash flow, we urge you to explore our five favorite business loans for startups, where the annual revenue requirements range anywhere between $50,000 and $480,000.

If your company routinely deals with invoices, you’ve most likely experienced the headache of delayed payments. These unpaid invoices can seriously impact your company’s turnover or cash flow.

Fortunately, there’s a valuable financing option for business owners: invoice factoring. Commonly referred to as accounts receivable financing, invoice factoring is a financial transaction where a business sells their unpaid invoices to a third-party lender. So instead of waiting for your customers to pay their invoices, you’ll be provided with extra cash flow to help you achieve your business goals, meet payroll, and pay operating bills on time each month.

3. Age of business

About 20% of businesses fail within their first year. So it’s no wonder why most banks and online lenders require a minimum business age from borrowers. In most cases, the minimum business age requirement can range from six months to two years.

However, keep in mind that lenders look at how long the business bank accounts have been open, not how long the entity has been registered with the government.

Without two years of business history, you probably won’t get approval from traditional lenders and banks.

But have no fear—there are a variety of alternative online lenders that have more relaxed approval processes than traditional lenders, which makes them viable options for brand-new businesses or businesses with bad credit.

Age-of-business requirements for certain lenders

Min. revenue
Min. time in business
Min. credit score
Get a loan
$50,000/yr. 6 mos.
$40,000/mo. 2 yrs. 625
$100,000/yr. 6 mos.600
$36,000/yr. 1 yr. 640
N/A 2 yrs.660
$100,000/yr.1 yr.

Data effective 3/24/23. At publishing time, amounts, rates, and requirements are current but are subject to change. Offers may not be available in all areas.

4. Current amount of debt

Next up, lenders look at debt-to-income ratio to measure the percentage of your monthly debt payments against your monthly gross income. Most lenders require a debt-to-income ratio of 50% or lower. As you may have guessed, small-business lenders are wary about lending to borrowers who already have other loans. To avoid the slippery slope of debt, create fail-proof payment plans and avoid high interest rates.

In addition to a debt-to-income ratio, lenders will want to see a balance sheet. This is a basic document that summarizes your business’s financial health, which includes assets, liabilities, and equity. Optimally, your total assets should equal the sum of all your liabilities and equity accounts. A balance sheet helps business owners determine if they can spend to grow or if they should reserve cash and save for a rainy day. While it may seem overwhelming, maintaining a balance sheet is crucial for every business. Plus, lenders will give your business bonus points if you come prepared with one.

To make your personal profile stronger, keep a low balance on credit cards and lines of credit (usually around 10% per account). A high credit card balance not only hurts your credit score but also impacts your personal financial health. So avoid spending mindlessly and racking up your credit card balance.

When companies lack a financial track record, lenders often require a personal guarantee from business owners. Even if you have an LLC or a C corporation, the lender can pursue you personally if you can’t repay the loan.

It’s important to note that not all debt is equal. For example, commercial real estate, lines of credit, business acquisition loans, and merchant cash advances all hold different weights with the lender. But if your debt is backed by assets, you’ll get approved more easily, no matter what kind of debt you have.

5. Collateral

For a loan approval, lenders may require collateral, such as invoices, equipment, real estate, and businesses—and the value of the item you collateralize will usually need to closely match the value of the loan. Believe it or not, business car loans can also require collateral. Collateral refers to tangible assets already owned by the business owner. Some lenders may require borrowers to pledge both business and personal assets to secure a business loan. We understand that this isn’t an ideal situation for startups. But we have good news: some business loans don’t require collateral. Certain business loans offer flexible term options and are easy to qualify for.

If you have to get into debt, be smart about it. When you can, use debt to buy income-generating assets. Creating multiple streams of income isn't just a means of survival, but it's also a strategy for building wealth. For example, when you buy an office complex or an existing business with a steady cash flow, your loan could and should pay for itself within a reasonable time frame. And smart management can increase the asset’s income even more.

Business loans that require collateral

Loan type
Typical loan amount
Typical interest/factor rates
Typical terms
Get a loan at Lendio

Commercial real estate



20–25 years




1–5 years

Invoice factoring

Up to 80% of receivables


Up to 1 year

Business vehicles



4–6 years

Business acquisition



Revolving or 10–25 Years

6. Industry

The type of industry your business falls under can be a deciding factor for many lenders. And in some cases, they may lean away from certain industries that are considered risky―including businesses deemed to be socially undesirable or that have an unsteady cash flow tend to be rejected most.

For example, many lenders won’t offer loans to businesses in the marijuana, gambling, or adult entertainment industries.

But seasonal industries can run into trouble too. If you own a seasonal business, such as a golf course, landscaping company, or ice cream truck, you most likely understand the importance of ample cash flow to sustain your company during the off-season. Given the ups and downs of these types of businesses, getting approved for a business loan may prove difficult―but not impossible.

7. Business plan

Though this is not certainly a strict requirement for many loans—unlike revenue, time in business and creditworthiness—having a business plan at the ready during the loan application process can provide a ton of value (and instill confidence) for potential lenders.

This confidence is garnered through the lender's ability to gain clarity on your financial situation—past, present, and future. It also allows them to access the information they need to evaluate whether the financial projections you're making are accurate and achievable. They can do this by looking at the other information included in a business plan: your business strategy, market research, and overall goals and objectives. This will allow them to see if you've put in the planning and research needed to ensure your business is a success, and ultimately, profitable.

Next steps

Now that you know what most lenders require, what comes next? We recommend taking these steps to help you secure the loan you need.

  1. Check your credit score using AnnualCreditReport.com.
  2. Find a loan provider that matches your credit score, annual income, and industry.
  3. Decide if you’re okay with collateral; if not, look only at unsecured loans.
  4. Assemble documents like bank statements, balance sheets, tax returns, and your business license.
  5. Create or polish an existing business plan.
  6. Calculate your origination fee, or what you’ll spend upfront to secure a loan.
Definition: Origination fee

Most lenders require an origination fee, which is a certain percentage of the total loan that pays the lender for assembling the loan in the first place. Think of it as a down payment; usually, an origination fee is 0.5% to 1% of the total loan amount.

Following these steps will help you approach your lender with more confidence—and remove surprises, financial or otherwise, from the equation.

More options: Credit cards vs. small-business loans

Do you need quick, convenient cash? Maybe in the hundreds instead of the thousands? Business credit cards have some of the same perks as personal cards: they give you instant cash to fund smaller projects (though we probably shouldn’t say “cash”—consider it a loan with an earlier repayment date and a potentially higher interest rate). They can also be useful if you want to build your business’s credit score so you can apply for a loan with better terms later on.

Of course, business credit cards have the same drawbacks as personal cards too. The temptation to keep racking up credit card debt can put your business in the red—permanently. Only use a business credit card for charges you can pay off before the next billing cycle, and remember what we said above about debt ratio: a business credit card can up your credit score, but it can also up your debt-to-income ratio.

Business credit cards at a glance

Consider a business credit card instead of a loan if you need a smaller amount of cash that you can pay off before each credit card bill is due.

Good for:
Small projects
Building business credit

Bad for:
Full business funding
Increased debt-to-income ratio

Don't qualify for a business loan? Get a personal loan instead.

Enter your loan needs and qualifications to get matched with a list of lenders best suited to you. Then, sort by the financing factor that you find most important. (Note: not all lenders allow personal loans for business use.)

The takeaway

There’s no one-size-fits-all answer when it comes to qualifying for a business loan. While you might think you need a perfect credit score and high annual income to get the best small-business loan, most lenders take a number of factors into consideration—if you’re lacking in one area, like a low credit score, you may be able to secure a loan through the strength of other areas, like a lower level of existing debt.

And with proper preparation and smart financial decisions, you can increase your chances of quick business loan approval.

The loan requirements above don’t just determine if you get approved for a loan―they can determine your interest rate too. Learn more in our guide to business loan rates.

Related reading

Business loan requirements FAQ

Traditional banks will have much higher requirements than online or alternative lenders, however, the same information will be looked at. This will include your personal credit score, business credit score (if you have one), time in business, tax return, EIN, proof of collateral, incorporation documents, bank statements, a business plan, and more.

The 5 C's of lending are: character, capacity, capital, collateral and condition.

Yes, it is possible, but you will have the most luck with a financing option that doesn't have a credit score requirement (or has a very low one)—like merchant cash advances or invoice factoring. 


At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

Sarah Ryther Francom
Written by
Sarah Ryther Francom
Sarah is Business.org’s senior content editor. She has more than 15 years of experience writing, editing, and managing business-focused content. As the former editor-in-chief of Utah Business magazine, Sarah oversaw the state’s premier business publication, developed several custom publications, and managed all business-to-business content. She also co-authored a business book with FJ Management CEO Crystal Maggelet. Sarah is passionate about helping small-business owners reach sustained success.
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