To qualify for a small business loan, most lenders want to see six things: a solid personal credit score, enough time in business, steady revenue, healthy cash flow after existing debts, collateral or a personal guarantee and organized paperwork. Banks set the highest bar on each of these, SBA lenders sit close behind and online lenders accept a much wider range of businesses in exchange for a higher price.
Knowing exactly where you stand on those six points changes how you shop. Instead of sending your details to every lender and hoping for the best, you can focus on lenders that are realistic for your profile, avoid unnecessary credit checks and fix the weak spots that are most likely to cost you an approval or a better rate.
The sections below follow the same order an underwriter usually does, explain the typical minimums for banks, SBA lenders and online lenders, and share practical steps you can take in the next few weeks to strengthen your business before you compare offers.
First stop: your personal credit
For most small businesses, the owner’s personal credit is the first thing pulled. That surprises some people. After all, it’s the business borrowing, not you. But young and small companies rarely have much business credit history, so lenders use your personal record as a preview of how the business will handle debt.
Banks generally want to see 680 or better, and their best rates tend to go to borrowers above 720. SBA lenders commonly look for scores in the mid to high 600s, even though the SBA itself doesn’t set one fixed minimum. Online lenders and other alternative lending providers are more relaxed. Many will work with scores in the low 600s, and some revenue based funders go as low as 500 because they care more about sales than about credit history.
The number isn’t the whole story. An underwriter will also scan for recent late payments, collections, tax liens or a bankruptcy in the last few years. Those can matter more than the score itself. A very thin file, with only one or two accounts, can also slow things down even when the score looks fine.
If your score isn’t where you’d like it, start by pulling your reports from all three bureaus and disputing anything that’s wrong. Paying credit card balances down below about 30% of their limits often lifts a score within a month or two. And hold off on opening new accounts right before you go loan shopping, since each hard inquiry can knock off a few points.
Next: how long you’ve been in business
Time in business is a lender’s shorthand for stability. A company that has made it through two or three years has shown that its model works and that the owner can get through slow stretches. Newer businesses close more often, so they’re treated as riskier.
Most banks want two years of history. SBA lenders usually do too, though a startup with an experienced owner, solid collateral and a strong plan can sometimes qualify for an SBA microloan or a 7(a) loan. Online lenders commonly start at six to twelve months, and a handful of alternative financing providers will look at businesses open as little as three months.
Your start date is usually measured from when the business was formed or began bringing in revenue. Keep your formation paperwork and your EIN confirmation letter somewhere easy to find, since lenders sometimes ask for them. And if you’re a few weeks away from a milestone like your first or second anniversary, it can genuinely pay to wait. Crossing that line often opens up a noticeably better set of options.
Then: how much money comes in
Revenue tells the lender how much flows through your business, and therefore how big a payment you can realistically carry. Many online lenders set a floor somewhere between $100,000 and $250,000 a year. Revenue based funders often look at monthly deposits instead, typically starting around $10,000 to $15,000 a month.
Online lenders usually confirm revenue by reading three to six months of business bank statements, and they pay attention to rhythm as much as totals. Steady deposits week after week look a lot better than one large payment followed by a quiet month, even when the totals match.
Banks and SBA lenders lean more on tax returns and financial statements, and that’s where a common trap shows up. If you work hard to keep taxable income low, your returns may show less profit than the business really earns. That’s great at tax time and less great when a bank is deciding how much to lend you.
The easiest fix in this area costs nothing: run every dollar of business income through a dedicated business account. When personal and business money are mixed together, deposits are harder to verify, and a healthy business can end up looking smaller than it is.
After that: what’s left over
Revenue shows what comes in. Cash flow shows what’s left after the bills, and that’s what actually repays a loan. Underwriters want to see enough room after your existing payments to cover the new one, with a cushion to spare.
Banks and SBA lenders often put a number on this called the debt service coverage ratio. A ratio of 1.25 means the business produces $1.25 of available cash for every $1.00 it owes in annual debt payments. Many banks look for at least 1.25, and SBA lenders commonly want something between 1.15 and 1.25. Online lenders may not calculate a formal ratio, but they study your balances closely, notice how often your account runs low and count how many other loans or advances you’re already paying.
Existing debt is a big deal here. If one or two short term advances are already pulling daily payments from your account, a lot of lenders will either pass or offer only a small amount. Paying down or consolidating expensive balances before you shop can make a real difference to both your approval and your price.
Overdrafts and returned payments stand out too. A couple over the past year can be forgiven. A steady pattern suggests the business is running too close to the edge. If you can, keep a bit of a buffer in your account for a couple of months before you start comparing offers.
Collateral and the personal guarantee
Collateral is something of value the lender can claim if the loan isn’t repaid. Because it lowers the lender’s risk, it usually means a bigger amount and a lower rate for you. Real estate, vehicles, machinery, inventory and unpaid invoices are all common examples.
Some products have collateral built in. Equipment financing is secured by the equipment you’re buying, and invoice financing is secured by the invoices themselves. Many online loans and lines of credit are technically unsecured, but the lender may still file a general lien on business assets, usually called a UCC filing.
Almost every small business lender will also ask owners with a meaningful stake, often 20% or more, to sign a personal guarantee. That makes you personally responsible if the business can’t pay. It’s standard across the industry, but it’s worth understanding fully before you sign, especially if there are several owners involved.
A useful exercise before you start: list the business assets you could pledge and roughly what each is worth. It helps you judge whether a secured option might get you a better deal than an unsecured one.
Last: the paperwork
How much paperwork you’ll need depends almost entirely on the type of lender. Having it ready matters more than people think, because good offers often expire within a few days.
Online lenders typically want three to six months of business bank statements, a photo ID, your EIN and some basic details about the business and its owners. Some will connect to your bank electronically and read the statements directly.
Banks and SBA lenders go further: two or three years of business and personal tax returns, a recent profit and loss statement and balance sheet, a list of your current debts, licenses, formation documents and, for larger requests, a business plan or a written explanation of how you’ll use the money.
Put everything into one folder before you begin. It can cut days or even weeks off the process.
How the bar changes by type of lender
| Banks | SBA lenders | Online lenders | |
|---|---|---|---|
| Credit score | 680 and up | Mid to high 600s | 500 to 625 and up |
| Time in business | 2 years or more | Usually 2 years | 3 to 12 months |
| Annual revenue | Often $250,000 and up | Varies by program | Often $100,000 and up |
| Paperwork | Full financials and tax returns | The most extensive | Bank statements and ID |
| Typical speed | 2 to 6 weeks | 1 to 3 months | Same day to 3 days |
Treat these as general ranges across commercial lending, not hard rules. Every lender sets its own criteria, and strength in one area can make up for weakness in another. A business with strong, steady deposits might be approved despite a lower score, while an owner with excellent credit might get some leeway on time in business.
Will shopping around hurt my credit?
This worry stops a lot of owners from comparing offers, and it’s mostly unfounded. Many online lenders start with a soft credit check, which doesn’t affect your score, to show you a likely offer. The hard check usually only happens once you decide to move forward with a particular lender.
It’s always fine to ask a lender which kind of check it runs before you share your details. Credit scoring models also tend to treat similar inquiries made within a short window as a group, so comparing a few lenders over a couple of weeks has less impact than spreading inquiries out over months.
And comparing lenders on Compare Small Business Loans doesn’t involve a credit check at all. You can see each lender’s credit minimum, time in business requirement and typical funding speed, then reach out only to the ones that fit.
If you’re not there yet
Falling short today doesn’t mean you’re out of options. Start by pinpointing which factor is holding you back. If it’s credit, give yourself two or three months to pay balances down and clean up errors. If it’s time in business, look at lenders who work with younger companies and plan to refinance into cheaper money once you pass the one or two year mark.
If revenue or cash flow is the sticking point, try a smaller amount. A lender that declines $100,000 might happily approve $40,000, and repaying a smaller loan on time builds exactly the track record you’ll need for bigger financing later. SBA microloans, community lenders, equipment leasing and vendor credit can also help fill the gap while the business grows.
One caution. Be very wary of anyone who promises guaranteed approval or asks for a fee before showing you an offer. A legitimate lender never needs to charge you just to look at your business.
A fifteen minute readiness check
Before you compare a single lender, sit down and answer a few questions honestly. What’s my current credit score, and is there anything wrong on my reports? How long has the business been operating? What have my average monthly deposits been over the last six months? What loans or advances am I already paying, and what do they cost each month? What could I offer as collateral? Are my statements, returns and ID ready to send?
With those answers in front of you, you’ll know which kind of lender is realistic, how much you can comfortably borrow and what to send when an offer looks good. It turns a stressful search into a fairly straightforward comparison, and it puts you in a much better spot to negotiate.
Putting it together
Qualifying for a small business loan comes down to six things: credit, time in business, revenue, cash flow, collateral and paperwork. Banks and SBA lenders set the highest bar and offer the cheapest money. Online and alternative lenders accept a much wider range of businesses at a higher price. And most owners can improve at least one of the six within a few months, which is often enough to step up to better terms.
Know where you stand, focus on lenders who fit and always compare more than one offer. Those three habits will do more for your approval odds, and your cost of borrowing, than anything else.
Frequently asked questions
What credit score do I need for a small business loan?
It depends on the lender. Banks generally look for 680 or higher, SBA lenders commonly prefer the mid to high 600s, many online lenders start around 600 to 625 and some revenue based funders go down to about 500.
Can a brand new business get a loan?
Yes, though the options are narrower. Some online and alternative lenders work with businesses open three to six months. SBA microloans, equipment financing and business credit cards are also common starting points.
Do I have to put up collateral?
Not always. Many online loans and lines of credit are unsecured, though they usually require a personal guarantee and may include a general lien on business assets. Offering collateral can help you qualify for more money at a lower rate.
How long does approval take?
Online lenders can approve and fund within one to three business days, sometimes the same day. Banks usually take two to six weeks, and SBA loans often take one to three months from first contact to funding.