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How Hard Is It To Get a Small Business Loan?

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  • Fixed interest rates
  • Larger funding amounts
  • Flexible repayment terms from months to several years

  • Must have good credit and a strong financial history
  • Longer approval process
  • Collateral requirements

How Hard Is It To Get a Small Business Loan?

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How Hard Is It To Get a Business Loan to Start A Business?

No matter the size of the business, whether a startup or an established company, many rely on financing as a catalyst for growth, or even as a means to get through tough times when operating capital is limited. Often businesses find themselves in need of additional cash flow to navigate the challenges that come with today's economic environment, and the question presents itself, “how hard is it to get a business loan?” 

The truth is that it varies and mainly varies on the history and financial position of your business. Personal credit score and finances can also impact your chance of approval too. Thankfully, there are resources to help you understand if you’ll qualify or what steps you need to take to qualify for a business loan. It’s important for business owners to know what qualifies them for a business loan and what factors lenders are focusing on. At mySMBscore you can view your business credit profile through the eyes of a lender. Plus, you can connect with lenders that can offer a business loan. 

Financing through a business loan can provide access to the resources that are needed to both expand the business and fund day-to-day operations. Read on to learn more about how to get a business loan. 

What are the requirements/approval factors to get a business loan? 

Lenders want to know the business's ability to repay the loan, which is generally determined by the following business loan requirements and approval factors: 

  • Revenue: Usually shown in the form of bank statements, tax returns and/or other financial statements, lenders will examine revenue to determine whether or not a company has the cash flow necessary to stay in business and can make the payments outlined in the loan conditions.  
  • Time in business: In the eyes of a lender, the longer you are in business, the less of a risk you are. While not always the case, most financial institutions prefer to see a few years in business and will offer better repayment terms if the business can prove its ability to stay running for a longer duration of time.
  • Credit History: Whether just starting the business or established for years, expect both your personal and business credit reports to be considered when applying for a business loan. Lenders want to see that both you and the business have a history of repaying your debts. 

Utilizing the tools provided by mySMBscore, you can determine how likely you are to get approved for a loan by monitoring your industry score, which tracks the key metrics lenders will use to determine your eligibility. 

What are the challenges of getting a small business loan?

When asking a lender to loan you money - it’s reasonable to assume they will want to know a few things about you and your financial history, as well as your business. Here are some challenges you may encounter in pursuit of a business loan. 

  • Poor or No Credit History: Lenders see poor credit history and/or lack of credit history as a higher risk, as there is no proof you or your business will meet the repayment terms of the money loaned to the business. 
  • Not Enough Time in Business: If you are unable to prove your business has the cash flow necessary to stay operating for a long duration of time, lenders are unable to ensure the business will meet its obligations for repayment of the loan. 
  • Lack of Business Plan: Without a business plan, lenders are unable to see how you plan to utilize the financing to repay the loan. 
  • Limited Collateral: Collateral is seen as a protection for lenders in the event the loan is not repaid. For newer businesses, limited collateral is also viewed as a higher risk for lenders. 

Struggling to get a traditional business loan? Consider these alternatives

  • Short-term business loans: Provides access to lower borrowing limits than the typical business loan. The typical loan repayment period is less than one year and is generally subject to a higher nominal interest rate
  • SBA loans: Funding is provided by the Small Business Administration, a government agency that dedicates resources to helping small businesses secure funding. The typical loan repayment period is 10-25 years and may require collateral. Prepare for long funding times. 
  • Equipment financing: Financing that is specifically used for businesses to obtain manufacturing equipment or other operating supplies, which is then used as collateral. Interest rates and repayment periods are structured similarly to personal auto loans and rely on credit scores accordingly. 
  • Invoice financing: One of the easiest loans to qualify for, financing is based on outstanding invoices and generally allows access to 80-90% of the value of the pending invoices. Lenders often don’t consider personal credit for approval and use the invoices as collateral to ensure repayment. 
  • Merchant cash advances: Useful for small businesses with poor/no credit or limited collateral, MCAs provide funding based on projected sales and establish a fee-based structure based on risk assessment. 

With personalized loan offers and access to loan specialists, mySMBscore can help you find the right lender and type of loan that is best suited for your business. MySMBscore is a valuable starting point for businesses in the market or soon-to-be in the market for a business loan or financing. 

What are the possible approval rates by loan type? 

Approval rates are subject to a variety of factors, including economic conditions, individual financial qualifications, and the type of loan you’re looking to secure. 

Here is a general breakdown of the various types of business loans and typical requirements: 

  • Short-term business loans: One year in business, $50k in annual revenue, and a personal credit score of 550 or higher. 
  • Business term loans: One-three years in business, $100k in annual revenue, and a personal credit score of 650 or higher. 
  • SBA loans: Two+ years in business, less than 500 employees, annual revenue ranging from $500k-7.5 million, and a personal credit score of 640 or higher.
  • Equipment financing: One to two years in business, a minimum of $50k in annual revenue, and a personal credit score of 650 or higher. Usually requires a down payment of 5-20%, depending on the equipment which is used as collateral. 
  • Invoice financing: Six+ months in business and a minimum of $50k in annual revenue. Outstanding invoices are used as collateral. 
  • Merchant cash advances: Six+ months in business, minimum of $40k in annual revenue, and a personal credit score of 400 or higher. 

To find out what your business might realistically qualify for, check loan offers with no credit impact at mySMBscore. 

What is the minimum credit score for a business loan?

Most lenders are going to want to see a credit score between 640-700 to qualify for a business loan. However, there will be other requirements to meet as well such as time in business, annual revenues, and so forth. 

It’s important to remember that credit score and other requirements can vary depending on the lender and the type of loan. In general, the better your credit score - the higher chance of approval and the more likely terms will be favorable. Even though you’re pursuing a business loan, chances are your personal credit score will be considered, especially if you’re a small business. If you’re in the infant stages of starting a business you might need to consider a personal loan instead. Once you’ve established enough history in business, one day in the near future you can graduate to a business loan.

With that being said, information is key. At mySMBscore you can utilize our technology to check your business score, view the financial health of your business as a lender would see it, and find lenders that can help. The ability to assess and understand the financial standing of your business through the eyes of a lender will empower you in many ways. First, it can help you understand areas you should improve before applying for a loan. Second, it can help you prepare for how much you might be able to borrow and what it might cost. Third, it can open the door to connect with lenders that are willing to extend your business a loan.

How can I increase my chances of getting a business loan?

Establishing and maintaining a good credit score, both personally and for the business, can greatly increase your odds of getting approved for a business loan. Regarding your personal credit score, this can be done by paying down outstanding debt and making timely payments. Regarding your business,  Beyond easy access to monitoring your business score, mySMBscore proprietary business score and dashboard helps show business owners what factors and financial ratios affect your standing in the eyes of lending institutions.  By understanding those factors, you can take steps to improve your business score and increase the likelihood of received funding at a low rate.

In addition to improving credit reports, creating a strong business plan can show lenders how your business will utilize the funding and how it plans to repay the loan. Boosting sales growth can also increase a business's chances of obtaining financing, as lenders believe that growing companies are better suited to meet loan repayment obligations. 

Is it hard to take out a loan to start a business?

Getting a loan to start a business is often more challenging than getting approved as an established business, as lenders have no history to gauge the financial stability of the business. Startup business loans may require a personal guarantee or be extended based solely on the owner's personal credit score and or assets. Startups in pursuit of a business loan should create a strong business plan to show lenders how their business will be able to afford the loan repayments. 


Businesses of all sizes rely on financing to maintain operations and to fund growth. It’s essential for businesses to educate themselves on the criteria that lenders will examine when applying for loans and to explore the different loan options available. 

With tools like mySMBscore, you can track your industry score based on your business's financial data and see the key lending metrics banks generally used to determine loan eligibility. Knowing how lenders view your business can provide a more realistic idea of what options may be available. As a great resource to connect with various lenders, mySMBscore can also assist with finding the right lender that can provide the financing option best suited for your business needs. 

Simplify the business loan process. . .check your SMB score today!

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