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

According to the Biz2Credit Small Business Lending Index, small business loans had a 14.5 percent approval rate from big banks as of December 2022. Small banks and alternative lenders approved more small business loans, with approval rates of 21.1 percent and 27.4 percent, respectively.

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 both to approve or deny your loan and to 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 instance, during the pandemic, some traditional lenders have hesitated to fund small businesses within the travel, hospitality and transportation sectors. These companies were often affected by lockdowns and travel restrictions.

If you’re hoping 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. However, 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.

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. At the high end, 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 coming in 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. However, 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 require you to provide collateral (such as equipment or inventory) that they can claim if you don’t pay back your loan. For instance, if you receive an SBA 7(a) loan over $350,000, you’ll need to secure it with business assets. 

If your business collateral isn’t valued at enough to cover the entire loan amount, you’ll also need to put up personal assets to account for the difference.

Difficulty of getting a loan by type

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

How hard is it to get an SBA loan?

Backed by the Small Business Administration and offered by individual lenders (including banks and credit unions), SBA loans are low-interest term loans designed to help small business owners grow their companies.

The SBA doesn’t administer loans itself. Instead, it partners with other lenders, which can set their own requirements for borrowers. Most small business owners with good credit scores and steady revenue should qualify. You will need equity in your company, which should be a for-profit firm that operates in the U.S. 

Applying for and receiving an SBA loan can take longer than other types of funding, and you’ll need to provide detailed financial documentation about your business. 

How hard is it to get a term loan?

Term loans are offered by banks and online lenders. They can be used for a range of business expenses, including purchasing equipment or hiring new employees. They allow you to borrow a fixed amount of money and pay it back with interest on a set schedule.

Since private lenders award term loans, the eligibility requirements and loan amounts vary. Generally speaking, though, you should have at least two years’ worth of business history before applying. You’ll need to prove that you have a satisfactory credit history and meet the lender’s minimum revenue requirements (which can be steep, especially if you’re borrowing from a bank). Collateral may also be necessary.

How hard is it to get a line of credit?

Like a credit card, a business line of credit lets you draw money as you need it (up to a certain limit), then repay it with interest. Line of credit limits tend to be higher than credit card limits, and it’s not unusual for a business to have a line of credit limit above $100,000. 

Requirements to get a line of credit are similar to other types of business financing. You’ll need to have been in business for at least six months before applying, and you should have at least a good credit score. Minimum cash flow requirements start around $30,000 per year, but some lenders expect $100,000 or more.

Requirements for unsecured lines of credit may be stricter because they’re not backed by collateral.

How hard is it to get equipment financing? 

This type of financing pays for specific equipment you need for your business — which can be anything from computers to tractors. The equipment is then used as collateral to secure your loan.

Qualifying for equipment financing can be easier than other types of loans, mainly since the equipment secures the lender’s investment. As a result, interest rates tend to be quite competitive. Still, you’ll need to meet credit and revenue requirements to receive this business loan.

How hard is it to get a merchant cash advance?

Merchant cash advances are a form of short-term business funding offered primarily by online lenders. In essence, MCAs are an advance on your future credit card sales: You’ll get a lump sum upfront, which you will repay by giving the lender a percentage of each card transaction (plus a fee) until the advance is paid off. 

Applying for an MCA can be done online in a few minutes. Requirements differ by lender, but you’ll usually need to submit information about your revenue, business history, credit score and financial statements (including debit/credit card transactions and bank statements). Your credit is less important than your cash flow.

On the plus side, you can get MCAs fairly quickly — even with a young business or subpar credit — and with minimal paperwork. However, merchant cash advances are meant to be short-term solutions and come with expensive fees, so they shouldn’t be your first choice for financing.

How hard is it to get invoice factoring or financing?

Invoice factoring and invoice financing are two to get cash for your business using your unpaid invoices as collateral. There are differences between the two, but with either option, a lender will give you an advance on the money your client owes you for a particular invoice in exchange for a fee. 

It varies by company, but factoring and financing firms often have requirements around minimum sales volume and the age of your business. Some may ask you to provide financial statements and tax returns related to your business. However, the lender’s primary focus will be determining whether your clients pay their invoices reliably.

Like merchant cash advances, invoice factoring and financing let you access money quickly and without much hassle — but at a high fee. These services are best suited for companies needing funds as soon as possible and can’t access other business financing.

The bottom line

If you’re ready to grow your company, getting a small business loan could be a smart option. While many types of loans are available, most will require you to have strong personal and business credit scores, reliable cash flow and, ideally, a couple of years of business history.

If you’re still working on building your business credit or growing revenue, there are other options to get cash quickly, including merchant cash advances, invoice factoring and invoice financing. You can also look into bad credit business loans, which target business owners with a personal FICO score of 630 or below.