A Quick Guide to Business Loan Requirements
Last updated Jan. 14, 2025
The small business loan requirements for any form of commercial funding vary widely, depending on the lender you work with and the type of financing you’re applying for. Use this quick guide to gather the likely information and documentation a lender will ask you for when you apply for a small business loan.
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1. Qualification Criteria
Time in Business
The longer you’ve been in business, the better it is for your application because it shows a lender that your business has had long-term success. Generally, the threshold for traditional lenders is two years, but many online lenders will have more flexibility with this requirement.
Personal Credit Score
Your personal credit score will not only influence whether you’re approved, but it can also play a role in the interest rate you’re offered. You’ll want to aim for a credit score of at least 600 for most online loans and a minimum of 690 for most SBA and bank loans.
Annual Revenue
Most lenders have an average annual revenue minimum to qualify for financing. Typically, banks look for a minimum of $100,000 to $250,000, while many alternative lenders require a minimum of $50,000 to $100,000.
Business Credit Score
This is based on your business’s history of payments to suppliers and lenders and may also take into account your business’s industry, size, and revenue. Many lenders use the FICO SBSS score to evaluate your loan application.
2. Loan Details
Desired Loan Amount
Simply put, how much money you want to borrow from the lender. It’s important to be straightforward and clear about how much financing you require (as well as how you’ll use it). You don’t want to ask for more than you can afford.
Loan Purpose
Many loan applications will ask you to state how you plan to use the loan. You’ll want to be as specific as possible. Generally, lenders allow a variety of uses for their funds. They want to make sure, however, that the type of loan you’re applying for best aligns with how you plan to use it.
3. Business Information
Industry
Most lenders have certain industries that they won’t lend to because they are too risky. Make sure that you correctly identify your business’s industry code in your loan application—a small mistake could cause a delay or even rejection.
Business Plan
You’ll want to use this document to show your lender that you’ve thought about all the potential opportunities and challenges for your business and how you’re going to grow a successful company.
Employer Identification Number (EIN)
An EIN is like a social security number for businesses; the IRS uses this unique, nine-digit number to track your business’s tax returns. You can quickly and easily apply for an EIN online—and it’s free.
Entity Type
From your lender’s perspective, knowing how your company is organized can give them insight into how you manage and operate your small business. Additionally, some lenders won’t lend to sole proprietorships and partnerships.
4. Disclosure of Debt
Business Debt Schedule
Small business lenders are very careful about lending to business owners who already have other loans, as they don’t want to offer you financing if you can’t afford your current loan payments. For this reason, you may be asked to provide a business debt schedule, which outlines all of your current liabilities, as part of your loan application.
Debt Service Coverage Ratio (DSCR)
Lenders often calculate your DSCR to evaluate whether you can afford a loan. The ratio illustrates your current debt and interest payments in relation to your current incoming cash flow. If your DSCR isn’t high enough, the lender may reject your application or ask you to reapply later after you’ve further paid down existing debt.
5. Legal and Operational Documentation
Business Licenses and Permits
Although business license requirements vary by state and locality, lenders will want to see your proof of ownership and license to operate a business.
Commercial Lease
If you have a brick-and-mortar business, consider including a copy of your commercial lease. It proves that your business will be able to use the property for as long as the duration of the lease, no matter what happens to the landlord—and it also reassures your lender that you’ll be able to conduct business to pay back the loan.
6. Financial Documentation
Business Finance Documents
A lender will typically want to see current (within the past 90 days) business financials, namely a profit and loss (P&L) statement, a balance sheet, and a cash flow statement.
Tax Returns
Lenders will use your tax returns to evaluate the health of your personal and business finances, and therefore, your ability to afford and pay back a business loan. For most traditional lenders, you’ll need to provide the past few years of your personal and business tax returns. Online lenders may require fewer records, especially if they lend to startups.
Bank Statements
Personal and business bank statements prove to lenders whether you can afford your loan and will be able to pay it back. These statements also give lenders some insight into how well you manage the cash coming into your business. Lenders will usually ask for three months of business bank statements to support the claims you’re making about your company’s financial history.
7. Collateral
Proof of Collateral
Although collateral isn’t always required, you may be asked to put up a fixed asset—like property or equipment—to secure your loan with a lender. If you default on the loan, the lender can seize your collateral and use it to make up for some of the money they’ve lost. Not all lenders require specific collateral. However, if you’re applying for an SBA loan or bank loan, for example, lenders will want to know what kind of collateral your small business has to offer and its value.
Fundera Can Help
Ready to apply for a small business loan? Fill out one simple application with Fundera, and we’ll show you your loan options. This won’t impact your credit score, and there’s no obligation to get your funding through one of our partners.
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How much do you need?
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Compare multiple lenders with one application