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It can be difficult to qualify for a small business loan. Lenders place many requirements on business loans, including minimum credit scores, annual revenues and time in business.

However, equipping yourself with the knowledge of how business loans work and how to qualify can boost your odds of getting approved.

Factors That Impact Business Loan Approval

Lenders consider many factors when evaluating business loan applications to determine if they will do business with you. Those factors also determine your interest rate and terms.

Annual Revenue

Lenders will consider your annual revenue to determine whether your business can repay a loan. Many lenders set a minimum annual revenue requirement—often $100,000 to $250,000—that your business must meet.

The higher your revenue, the more likely it is that your business will qualify for a loan. A high annual revenue will also help you qualify for the best interest rates.

Credit Score

Lenders use your personal credit score to understand how you’ve managed debt in the past. A low credit score may indicate that you don’t manage debt responsibly, while a high score can show the opposite.

Some lenders require a good credit score, or a FICO Score of at least 670, to qualify for a loan. Nonetheless, there are lenders that offer bad credit business loans with minimum credit requirements as low as 500.

Lenders may also consider your business credit score when evaluating a loan application. This score can tell lenders if your business is likely to default on a loan. However, the scoring models lenders use may vary, so confirm with each lender to see which model they use.

Time in Business

Lenders will consider how long your business has been in operation to determine whether or not you’ll be able to make payments throughout the loan term. Your time in business can demonstrate your business’s stability.

The longer your time in business, the better. Generally, lenders set a minimum time in business of one year to two years.

Business Plan

Lenders want to work with successful businesses. As a result, writing a comprehensive business plan can be a vital part of your loan application. This should include things like market and competitor research, an overview of your products and services, and an analysis of your strengths, weaknesses, opportunities and threats.


Those seeking a secured business loan need to back their loan with sufficient collateral, which your lender can take possession of if you stop making payments. Collateral can include equipment or real estate, or you may use a lien on your business’s assets to secure funding.

Types of Business Loans and Their Requirements

There are many different types of business loans, each with different requirements. Depending on your business and its needs, one financing option may work better than another.

Term Loans

Term loans are the most common type of business loan. These loans are disbursed in a lump sum and then repaid over the predetermined term, with interest. You’ll generally need a credit score of at least 500 and at least one year in business to qualify.

You’ll also need to meet minimum monthly revenue requirements and may be required to pledge collateral to back the loan.

SBA Loans

The SBA offers business loans—including 7(a), 504 and microloans—through partnered lenders. Eligibility varies by lender, but your business typically must meet SBA’s size standards, be capable of repaying the loan and have “a sound business purpose.” You may even qualify with bad credit if your business meets these requirements.

Equipment Loans

An equipment loan may be the right financing option if your business needs specific equipment. These often require applicants to meet certain minimum credit and time in business requirements. In addition, the equipment you’re financing typically serves as collateral, and you may be asked to provide a compelling business plan. Specific requirements vary by lender.

Business Lines of Credit

Business lines of credit provide access to credit over a period of time rather than a lump sum. To qualify, you’ll need to meet the minimum credit score requirement, be in business for at least one year and generate an annual revenue of at least $100,000. You may also need to back the loan with collateral.

Invoice Factoring

Invoice factoring is an alternative form of business financing that allows you to sell outstanding invoices to a factoring company, for a fee. It can be easier to qualify for invoice factoring than other forms of financing, but lenders will often evaluate the creditworthiness of a business’s customers to determine if they’ll repay the invoices. Lenders may also require a business bank account number and a tax ID number.

Merchant Cash Advances

Rather than acting as a loan, a merchant cash advance (MCA) is financing based on expected future sales. This financing is then repaid with a portion of your future credit card sales.

MCAs can be easier to qualify for than other financing. However, you’ll likely need to provide at least three to six months’ worth of sufficient business bank account statements and merchant or credit card processing account statements.

How To Improve Your Business Loan Eligibility

If you’re concerned about qualifying for a loan, or you want to ensure that you get the best small business loan possible, there are several steps you can take:

  1. Improve your credit. This can take time, but it can make the difference between being turned down and receiving a loan offer. To improve your credit, you can pay down revolving debt and make debt payments on time.
  2. Gather your documents. Business loan applications may require many types of information and documentation to be approved. You may need articles of incorporation, personal and business financial forms such as tax returns and balance sheets, and projected financial statements.
  3. Hone your business plan. Your business plan is a key factor in loan approval, so you’ll be best served by making sure that it represents your business best. This can mean conducting additional market analysis, zeroing in on your marketing plan or simply refining your plan.
  4. Consider collateral. If you can’t qualify based on your credit alone, you may want to consider adding collateral to your business loan application. Since there is less risk to the lender for a secured loan, you may be more likely to get approved.

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Last Update: July 1, 2024

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