Key takeaways

  • Lenders have minimum requirements for business loans, including revenue, credit history and time in business
  • The type of business loan you apply for will impact how hard it is to get
  • If you have a strong personal credit score, solid financials and at least a year in business, you may have an easier time securing a business loan

Business owners need funds, especially when starting or expanding a company. While many small business financing options are available, loans remain one of the most popular — but just how hard is it to get a business loan?

The Q4 2023 Small Business Lending Survey found that large banks approved the least amount of business loans, with approval rates at 49 percent. Small banks were significantly more likely to approve loans, with approval rates at 89 percent. Additionally, 24 percent of lenders reported tightening their credit standards, which can make it harder to get a business loan.

Factors that impact business loan approval 

When making a loan decision, lenders will consider your company’s characteristics and whether they meet the lender’s business loan requirements. Lenders place the heaviest weight on your cash flow, credit history and time in business. They’ll use this information to approve or deny your loan and determine your interest rate.

Don’t get discouraged if your business doesn’t meet all these standards. If you lack in one area but fulfill or exceed other criteria, you may still qualify for a loan.


For lenders, working with companies in consistent and profitable industries is more appealing than loaning money to businesses in riskier industries. For example, lenders typically exclude businesses in the gambling, real estate or adult entertainment industry. 

If you hope to get a government-backed loan from the U.S. Small Business Administration, your company must fit specific industry requirements. Most industries are eligible for SBA funding; exceptions include gambling, multi-level marketing schemes and religious institutions.

Time in business

Proving that you can successfully manage a company over time is important to lenders. The longer you’ve been in business, the more favorable your approval odds. From a lender’s perspective, having a track record of successful business management demonstrates that you’ll use your loan responsibly and pay it back on time.

Traditional banks typically look for at least two years of business history when approving a loan. But you might be able to secure financing from other lenders if you’ve been in business for six months or more. Still in the startup stage? Check out the best startup business loans.

Bankrate insight

The 2023 Small Business Credit Survey found that businesses that were more established with higher revenue were more likely to be fully approved for a business loan, line of credit or merchant cash advance.


Businesses with at least $100,000 to $1,000,000 in revenue were 19 percent more likely to be fully approved for a loan compared to businesses with less than $100,000 in revenue. Similarly, businesses aged six years to 20 years were 13 percent more likely to be fully approved than businesses under five years old.

Credit score and history

No matter what type of loan you’re applying for, your credit history is crucial in determining your eligibility. Having a higher credit score will boost your chances of getting approved for a business loan. Lenders want a clear understanding of how you’ve dealt with debt in the past so they may evaluate your personal and business credit scores when making a loan decision.

The minimum credit score for a business loan depends on the type of lender. Banks and credit unions may require a score of 700 or higher. Some online and alternative lenders accept credit scores in the mid-500s if your business is otherwise financially healthy.

Cash flow

Your company’s cash flow is another essential factor. Lenders need proof that you have enough revenue to keep your business afloat and repay your loan. 

Lenders often have minimum revenue requirements for loan recipients, with some requiring as little as $10,000 in annual revenue. But traditional lenders will have higher cash flow expectations, with many requiring at least $100,000 in yearly revenue.

Loan amount

Small business loan amounts range depending on the kind of loan, the company’s cash flow, the type of lender and more.

When figuring out how much money to request, be mindful of your current and projected cash flow. You want to be realistic about how much you can afford to borrow — especially if you have a seasonal business or your revenue is inconsistent throughout the year.

The loan amount you request isn’t necessarily what you will receive. While reviewing your loan application, lenders will consider all the above factors to determine how much you can borrow.


Some lenders may require you to provide collateral (such as equipment or inventory) they can claim if you don’t repay your loan. For instance, if you receive an SBA 7(a) loan over $50,000, you’ll need to secure it with business assets. 

If your business collateral’s value doesn’t cover the entire loan amount, you’ll need to put up personal assets to account for the difference.

Business plan

Not all lenders require a business plan, but having one is a good idea. Lenders need to properly assess your business’s ability to make money and repay the loan, and a business plan will lay out this information and explain the business’s potential revenue.

If you have an established business, a lender may only want proof of revenue and cash flow to ensure the business can repay the loan.


Other debts and financial obligations can impact your ability to afford a business loan. Before applying for a loan, calculate your debt-service coverage ratio, which compares your business’s debt and cash flow. Since lenders use this number to see whether you can afford an additional loan or debt, it’s best to know how lenders may view your business and its financial health. Having a business debt schedule for all your long-term debts is also helpful.

Difficulty of getting a loan by type

In addition to the above factors, your chances of getting a loan depend on the type of business loan you’re applying for. 

While factors vary depending on the lender, here are some of the standard requirements and benefits of the most popular loan types.

Loan type Purpose Requirements Benefits
SBA loan Growth and expansion of business
  • Financial documentation
  • Minimum credit score
  • Minimum annual revenue
  • Minimum time in business
  • Government-backed
  • Competitive interest rates
  • Multiple loan types
  • Extended repayment periods
Term loan Cover operating expenses and business purchases
  • Minimum credit score
  • Collateral
  • Minimum annual revenue
  • Minimum of two years in business
  • Builds business credit
  • Improves cash flow
Business line of credit Cover short-term business expenses
  • Collateral
  • Minimum of six months in business
  • Often requires an annual revenue of $100,000
  • Minimum credit scored
  • Avoid paying interest if the bill is paid in full
  • Improved cash flow
  • Builds business credit
Equipment financing Purchase business expenses
  • Business credit score
  • Personal credit score
  • Minimum of one year in business
  • Profit and loss statement
  • Makes the cost of purchasing equipment more affordable
  • Builds business credit
Merchant cash advance Cover short-term business expenses
  • Minimum annual revenue
  • Minimum time in  business
  • Minimum credit score
  • Financial statements
  • Quick access to cash
  • Available to all businesses, even those with sub-par credit
  • Limited paperwork
  • Flexible approval
Invoice factoring or financing Cover business expenses immediately, instead of waiting for invoices to be paid
  • Minimum sales volume
  • Minimum age of your business
  • Financial statements, including tax returns
  • Fast access to funds
  • Improves cash flow
  • No credit check for invoice factoring

Alternatives to business loans

Securing a traditional small business loan can be challenging, and depending on your situation, a bad credit business loan or alternative lending may be better options for securing capital for your business. Consider some of these alternatives to traditional business loans.

Business credit card

A business credit card is similar to a personal credit card but restricted to business purposes, and the credit limit is usually higher than what you’ll see with a personal card. Some business owners may prefer a business credit card to a business loan as they avoid paying interest if they pay the bill in full every month, making it more affordable than a loan when managed properly. Additionally, business credit cards can offer rewards and benefits, including a sign-up bonus, an introductory APR or travel rewards.


Grants are appealing to many business owners as the money doesn’t need to be repaid. But, as a result, it can be competitive and the application processes are long.

Federal and state government agencies, nonprofit organizations and private companies and businesses typically offer business grants.


Crowdfunding is another way to get the capital to cover startup costs or business needs. Depending on the type of crowdfunding you choose, there is typically no application, credit check or interest to worry about. But crowdfunding platforms do charge fees, including payment processing fees.

Peer-to-peer lending

Similar to debt crowdfunding, peer-to-peer (P2P) lending allows businesses to borrow money from one or more investors in the form of a loan. If investors agree to fund your P2P loan, the money is repaid with interest, and monthly payments are fixed. An application and a credit check are required, and most sites allow people to get prequalified to confirm potential eligibility before filling out an application.

Bottom line

If you’re ready to grow your company, getting a small business loan could be a smart option. While getting a business loan can be difficult since most require strong personal and business credit scores, reliable cash flow and at least two years in business, there are alternatives available to obtain the cash you need. 

Once you determine your business’s needs, be sure to explore all options for business financing — whether that’s traditional business loans or alternative lenders.

Frequently asked questions

  • The minimum credit score needed for a business loan varies based on the lender, but securing a loan with a score in the mid-500s is possible.
  • Securing a small business loan isn’t easy for every business. Many factors are used to evaluate a business, but those with a high annual revenue and healthy credit score may have an easier time getting approved compared to a new business with a low annual revenue or poor credit score.
  • Requirements vary based on the lender, but many lenders look at annual revenue, business plan, business credit score, personal financial history, years in business, industry, debts and other obligations.