Most businesses rely on financing to grow and carry them through times when the finances are tight. Whether your business is a corporation with hundreds of people or a small business with less than ten employees, a business loan may benefit you. Qualifying for a corporate business loan is different than qualifying for a small business loan, and they have different requirements.
Several factors go into getting approved for a small business loan, including revenue, length of time in business, loan amount, and credit history. Other factors apply as well, such as the overall economic situation in the country. For example, during the COVID-19 pandemic’s impact, the approval rate was nearly 30%, while it has recently dropped back to around 15%.
When applying for a small business loan, one of the most important questions your lender will ask is if your business has enough money to make periodic payments. The lender will want to know if you can stay in business and if your company has enough cash flow to make the required loan payments.
Another question that factors heavily into the loan approval process is the length of time in business. The longer your business has been around, the better because the loan company is trying to predict what you have done based on the past. Most traditional financial institutions would like to see a couple of years of business, but that doesn’t apply to every lender.
Finally, the amount of loan you are asking for and your credit history will play a part. If you are requesting a smaller loan, it can be easier to obtain. The average loan size is between 50% and 100% of your average monthly revenue, but you can always ask for more or less. Creditworthiness will also be factored into your small business loan application, and strong personal credit scores and solid business credit history will improve your chances.
If you are interested in applying for a small business loan but are unsure if your business will qualify, it can be beneficial to speak to loan experts, such as those available at Aspen Commercial Lending. They can review your information and help you receive the funding your business needs.