What You Need to Qualify for a Business Loan

A business loan can provide you with extra financing to help you cover payroll or purchase inventory, or it can improve your cash flow or help you grow your business. Before applying, consider these common requirements for business loans.

Have a Good Credit Score

Your personal and business credit scores are an important factor in determining whether you’ll qualify for a loan, as well as how much money you can borrow. Having a good credit score shows that you’ve been responsible with your finances in the past and gives lenders confidence that you’ll repay your loan on time. What’s considered an acceptable credit score will vary from lender to lender. However, the higher your score is, the more credit you can borrow at an affordable rate.

Be Able to Prove Your Income

In order to qualify for a business loan, lenders want proof of income from your business. They may ask for tax returns from the last few years or bank statements showing recent deposits to your company’s account. They want to see that your company has been profitable over time and that it can continue to pay back any debt without any problems.

Have Collateral Available if Necessary

If you don’t have sufficient assets like property or stocks to put up as collateral against the loan, then it will be harder to convince a lender that they’ll be repaid in full if something goes wrong with their investment in your company’s future success.

Create a Solid Business Plan

You need to be able to show that you have a viable business model and a solid plan for growing your company. A lender will want to see that you have considered the risks of your business and have a plan in place to mitigate them.

Proof of How Long Your Business Has Survived

If your business is extremely new, it may be hard to get approved for a loan. However, if you can prove to your lender that your business has been up and running for at least a few years, you’re more likely to get the loan you want.