Qualifications for a Business Loan

What are the Qualifications and Benefits of Small Business Loans?

What Business Loan Can I Get?

If you’re starting a new business, or have an established, strong business, a small business loan could help you explode your growth and earnings by providing you with the financial wherewithal to either establish or grow your business, acquire inventory, or simply advertise your small business. So how does a small business loan benefit you in real terms? It really starts before you begin the process of looking to fund your business for business expansion. The process of seeking capital loans forces you to ask yourself a number of questions.

Do I want an SBA loan from the small business administration and their SBA lenders or should I seek financing from traditional lenders and credit unions who offer bank loans?

Maybe you need to consider an alternative lender. This exercise makes you focus on not only the business loan application process and requirements but the financial and business documents you need beforehand.

Qualifications for a Business Loan

Depending on the source of the funds and the lender’s requirements this can include:

  • The last 3 years of personal and business income tax returns
  • Financial statements including your P&L (Profit and Loss) and Balance Sheet
  • Bank account statements including personal and business bank checking account and business savings account
  • Copy of your driver’s license Business licenses
  • Copy of your lease agreement
  • Articles of incorporation
  • Proof that you can do business in your state
  • Business plans


Do you need to provide collateral or assets? Do you need to check your credit? Who can qualify for a small business loan? The bigger question is will I qualify for a business loan? The real question is what are the minimum qualifications? How flexible is the lender? Can you offset one area of weakness with a solid business and strong annual revenues even though you may have poor credit or even bad credit?

Have you been in business long enough to meet what banks require? What Small Business Loans Are Available? Small Business Loans and business lending are a lot like shoes. They come in a bunch of styles, colors, and sizes. One common type of business loan is the commercial real estate loan.

Commercial real estate loans are typically for those that either own a commercial piece of property as owner-occupied or look to acquire commercial property for investment purposes. While there are tremendous benefits to this type of loan it will not typically help a small business owner with challenges in their day-to-day operations.

A business credit line (also known as a business line of credit) is a fixed, pre-determined amount of credit (money made available to you) that a company could draw from as demands occur.  This is traditionally referred to as “working capital” and can be both secured or unsecured.

A small business loan is a certain amount of money that is borrowed by a business that desires to start or run his/her business. There are a variety of small business loans offered by the government (SBA loans), banks (bank small business loans), or alternative small business lenders.

Again, these may be secured or unsecured. The loan amounts can vary depending on a score of variables. Generally, you can expect to get between $10,000 to $2 million from the top alternative lenders. The loan proceeds are deposited in hours or a day or two from nontraditional lenders while banks and traditional financial institutions may need close to three months to fund your account.

Unsecured small business loans are typically offered by an alternative lender (and not a bank) based on your current company’s cash flow and to a lesser degree your personal credit score (FICO scores of 550 or better with exceptions to go as low as 500). The lender’s protection is your cash flow or cash receivables. On the other hand, if you are willing to “secure” the loan or personally guarantee the small business loan, you will be offered better rates and terms.

However, your lender will certainly need to see a decent credit score (FICO score of 640 or better), a clean credit history, and a steady and stable cash flow.

Are Business Loans a Good Idea?

Getting a small business loan for your new or existing business could bring relief in many ways. A small business loan permits you to grow and expand your business without the financial stress of having too much month at the end of the money. Maybe you need money for payroll or taxes. Do you need to renovate, buy more equipment or inventory?

What if the competitor right above or below you were to go out of business. Maybe you’d like to purchase their assets or customers. The uses for working capital are only limited by your imagination.

What is Business Loan Underwriting?

Next, ask the lender directly about any concerns you have regarding the firm’s lending qualifications. This could eliminate any kind of worries in your mind before beginning the process. You must think of exactly how your business will use the small business loan. It’s best to understand this before you begin the process. Make sure that you know what’s on your personal (and even business credit) report before you start.

Your credit record score will certainly take a small hit if you have countless credit inquiries from lending companies, which could reduce your credit score for the future (inquiries will fall off after 6 months). Just know that the “inquiries” only make up ten percent of your total score. The bottom line is that this has the least impact on your overall score.

Make certain your repayment of any outstanding personal or business loans, mortgages and rents, credit cards, invoices, payables, etc., have in fact been made in a timely manner over the previous 2 years or even more. The nice thing about using an alternative small business loan lender, they are far more forgiving and will understand any blemishes you have, including a limited number of monthly bounced checks or NSF’s.

Small business loan companies base your approval on over 100 to 900 different metrics, not just your specific credit score, especially if you are getting an unsecured small business loan.

Where to Get Small Business Loan

Obtaining a small business loan for your new or established business could relieve not having the capital to grow or expand your business and relief from not being able to take advantage of business opportunities. A small business loan enables you to grow your new or established business.

The interest on a small business loan is tax-deductible. Please speak to your tax accountant to determine the impact on your returns. Do some research to find a small business loan company that’s right for you. Check around online for interest rates, small business loan qualifications, other requirements (time in business, credit scores, minimum revenue, etc.), and flexibility of rates and terms.

Some lenders will certainly offer some creative small business loan options to deal with your specific circumstances.

Keep these ideas in mind as you search for your small business loan choices. You’ll get on the road to success in no time at all!

Mark Kane

Mark J. Kane is a successful entrepreneur and small business owner. He spent 17 years in the investment banking industry. As CEO of Sunwise Capital, he understands the challenges of building a business through equity, debt, and off-balance sheet financing.

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