Business loan requirements

How long do you need to be in business?

Banks and most SBA lenders want two years of operating history, because they underwrite from two years of tax returns. Online term lenders and lines typically accept one year, and some accept six months. Cash advance and revenue based lenders go as low as three to six months of deposits.

Time in business is counted from the date you started operating, not the date you formed the entity, and lenders will ask for proof such as your first business bank statement. If you are under a year, start with financing under one year. If you have no revenue yet, read startup with no revenue before you apply anywhere, because most lenders will decline.

How much revenue do you need?

Most online lenders set a floor of $100,000 to $250,000 a year, or $8,000 to $20,000 a month in deposits, and they verify it from bank statements rather than from what you type on the form. Banks rarely publish a floor, but they size loans on cash flow, so a business under $250,000 in revenue will usually qualify for very little.

Consistency matters as much as the total. Lenders look at the trend over the last three to twelve months and how low the balance gets each month. Steady deposits of $30,000 a month look better than $60,000 one month and $5,000 the next. Seasonal businesses should read seasonal business financing.

What credit score do you need?

Banks typically want a personal score of 680 or higher, SBA lenders around 650, online lenders 600, and cash advance companies 500 or lower. Personal credit matters even for an LLC or corporation because almost every loan under $1 million carries a personal guarantee.

Business credit scores matter for SBA loans and larger bank loans; the SBA uses a FICO SBSS prescreen with a minimum of 155 for its smaller 7(a) loans. Recent problems weigh more than old ones: a bankruptcy from six years ago is survivable, a 90 day late payment from last month is not. Business credit scores explains each score, and bad credit business loans covers what is available below 600.

How much cash flow do lenders want to see?

Lenders want your cash flow to cover the new loan payment with room to spare. The measure is the debt service coverage ratio: net operating income divided by all annual loan payments. Banks typically want 1.25 or higher, meaning $1.25 of cash flow for every $1 of payments. SBA lenders typically accept 1.15. Online lenders cap the payment at a share of your monthly deposits instead.

Profit on paper is not the same as cash flow. Lenders add back depreciation and interest, then subtract taxes and distributions. DSCR explained walks through the formula with an example, and the DSCR calculator gives you your number.

Do you need collateral?

For most loans under $100,000 the answer is no beyond a personal guarantee and a blanket UCC lien on business assets. Bank term loans over $250,000 usually expect specific collateral: equipment, real estate, receivables or inventory. SBA rules require lenders to take available collateral, including a lien on personal real estate when the loan is not fully secured, but the SBA does not allow a decline solely for lack of collateral.

Equipment and real estate loans are secured by the asset you buy, which is why they are easier to get than an unsecured loan of the same size. If you have nothing to pledge, no collateral business loans lists the products that rely on cash flow.

Which industries face extra requirements?

Some industries are restricted or priced higher by many lenders: restaurants, trucking, construction, cannabis, adult businesses, gambling, firearms, crypto and anything lenders consider speculative. Restriction does not mean no financing exists; it means fewer lenders and more scrutiny. Restaurants and trucking, for example, have lenders who specialize in them.

SBA loans require a for profit business located in the US. Check the industries hub for what lenders in your category look for, and be upfront about your industry; being vague is a common reason files stall. You can apply here, or ask your AI assistant to prepare and submit the application through our MCP server; see the agents hub.