What You Need To Know
Understanding the requirements for a small business loan is very important if you are in need of business capital and considering an SBA loan to get the necessary funding needed to continue operating and growing your business. But how do you qualify for an SBA loan and get the cash you need?
In this article from Progressive Business Capital, we’ll take a look at the common requirements that you’ll need to meet when applying for a small business loan.
1. Reasonable Credit Score
First, most lenders will look at your credit score to determine whether or not you qualify for a loan. Your personal credit score may be used, if you do not have an established business credit score. This score ranges from 300 to 850 (higher is better), and is a measurement of how likely you are to be able to repay your debts.
If you have more established commercial transactions, you may have a solid business credit score. This is separate from your personal credit score, and ranges between 0 and 100 (higher is better). Again, this score is a measurement of the ability of your business to repay debts, and helps lenders understand the risk of lending to you.
2. Business Income Records
Usually, you will need to provide a lender with documentation about your operations. All types of loans and lenders, such as SBA lenders, have different requirements, and may ask for documentation including profit and loss statements, balance sheets, cash flow statements, or more. You may also be asked to provide your business and/or personal tax returns for verification.
3. Age Of Your Business
If you run an older, more well-established company, you’ll have an easier time getting a loan compared to a newly-established company. Lenders usually want you to have been in business for at least 2 years, though this can vary.
4. Debt-To-Income Ratio
Debt-to-income (DTI) is a measurement of how much your business is paying in monthly debt compared to how much income your commercial transactions are bringing in. For example, if you have $10,000 in debt and rent payments, and your business makes $30,000/month, you have a DTI ratio of 33%. The lower your DTI, the more likely you are to qualify for an SBA loan or cash advances with favorable terms.
In some cases, you may need to put up collateral in the form of personal property or business property to secure a loan. This collateral helps protect the bank that lends you money, since they can repossess it if you do not pay your loan, which may mean a lower interest rate on your loan.
Need Business Funding? Progressive Business Capital Can Help!
At Progressive Business Capital, we can help you get a small business loan or a merchant cash advance that will give you the working capital you need. Contact us now to learn more about our application requirements for small business loans, and start connecting with qualified lenders right away.