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Here are seven things financial institutions commonly check to determine if you qualify for a loan.
We start with a quick survey to better understand your business's unique needs.
Once we have found your personalized match, our team will be happy to discuss the further process.
1. Personal and business credit scores
Your personal credit score indicates your ability to repay personal debts such as credit cards, car loans, and mortgages. Small business lenders will request a personal credit check because they want to see how you are managing your debts.

NerdWallet Credit Score Bands. Used for general guidance.
Quick ways to build personal credit include disputing errors on your reports and paying your bills on time and in full.
2. Annual revenue
Many lenders will only consider businesses that bring in at least a minimum monthly or annual revenue. Lenders will look at your income to see if you have enough cash flow to pay the loan.
How much cash flow you need depends on the individual lender. For example, online lender OnDeck requires $100,000 in annual revenue to qualify for a line of credit, while Bank of America's secured business loan minimum is $250,000. .
Public debt service coverage ratio
A similar financial metric that lenders consider is the Debt Service Coverage Ratio (also known as DSCR). This ratio compares available operating income to current debt. To calculate your DSCR, divide your annual operating income by your total annual debt payments.
For example, if your annual income is $150,000 and your total debt payments are $100,000, your debt service coverage ratio is 1.5. Lenders generally want a ratio higher than 1, usually at least 1.25. This is to show that cash flow is sufficient to cover debt.
3. Years of establishment
Lenders use your business hours as a quick measure of success. The longer you stay in business, the more likely you are to have more money to pay off your debts.
4. Industry and size
Every industry has a different level of risk, and some industries, such as restaurants and beauty services, may be considered high risk because revenues are likely to be unstable.
There are also certain industries that many lenders do not do business with at all. These typically include adult entertainment, pharmaceutical dispensaries and products, gambling, and money services businesses.
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Must be a commercial enterprise.
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You may not operate in an ineligible industry, such as real estate investing, gambling, or political lobbying.
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Must have no past defaults and be current on all government loans. If you are late (not paid within 90 days of the due date) on your federal student loan or government-backed mortgage, you will be disqualified. Illustration.
5. Business plan and financing proposal
These documents must clearly demonstrate that there is sufficient cash flow to cover ongoing business expenses and new loan payments. This gives lenders more confidence in your business and increases your chances of getting your loan approved. On the other hand, if your new business doesn't have any existing revenue to show lenders, a thorough business plan can convince them that you'll be successful in the future.
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6. Collateral or personal guarantee
Each financial institution has its own rules, so if you're not sure what you need, ask.
7. Business and Financial Documents
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Individual and corporate income tax returns.
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Financial documents such as income statements, balance sheets, and cash flow statements.
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Personal and corporate bank statements.
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Driving license photo.
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Commercial lease.
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business license.
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articles of incorporation.
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Proof of Collateral.
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business plan.
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Legal contracts and agreements.
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Resume showing relevant management or business experience.
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Financial forecasting with limited operating history.
Online lenders may offer a streamlined application process with less paperwork and faster underwriting.
🤓 Otaku Tips
When completing your business loan application, it's important to double-check that your documents are accurate and up-to-date. This not only speeds up the funding process, but also prevents automatic rejections. If your lender uses automated underwriting and you enter incorrect information, you could be automatically denied even if you qualify.
find the right business loan
FAQ
Business loan requirements vary by lender, but generally you need good credit, strong finances, and an established business history to qualify for a loan. Traditional lenders typically have the most stringent requirements, while online lenders are more flexible.
Banks typically require good to excellent credit (score of 690 or higher), strong financial standing, and at least two years in business to qualify for a loan. Collateral and personal guarantees will probably also be required.
You will typically need to submit detailed documentation as part of your application. Also, some banks require you to apply directly.
Each financial institution has its own documentation requirements, but at a minimum you will need to provide the following:
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Business and personal bank statements.
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Corporate and personal tax returns.
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Financial statements such as balance sheets and income statements.
Traditional lenders typically require more paperwork than online lenders.
Former NerdWallet writer Steve Nicastro contributed to this article.