Like many business owners, you may be struggling to stay afloat due to the Coronavirus and considering a loan for the first time. Or perhaps you’re looking to expand your business and need access to working capital. Whatever the case, the right small business loan can make all the difference in planning for the future.

Because the application process at traditional institutions can be lengthy and complicated, it’s helpful to know how to qualify for a small business loan off the bat. As well as other outlets that may be available to you and your business you may not be aware of, such as alternative lenders.

Small Business Loan Requirements

There are several different types of documents you may be required to provide when applying for a small business loan. While they may vary slightly from lender to lender, some of the most comm

There are several different types of documents you may be required to provide when applying for a small business loan. While they may vary slightly from lender to lender, some of the most common documentation that may be required can include the following:

  • Tax returns, both personal and business
  • Income statements
  • Bank statements, both personal and business
  • Articles of incorporation
  • Commercial leases
  • Personal identification, such as a copy of your driver’s license
  • Your balance sheet

As you can see, you’ll have to provide documentation, and gathering everything you need can be time-consuming. Even if you are still deciding on a financing option, it’s a good idea to start collecting these items as soon as possible.

Conversely, if you’re faced with a bit of a time crunch, you may want to consider alternative lenders instead. For borrowers looking for a fast and simple process and access to funds quickly, this may be a better fit for your immediate business needs.

Depending on the loan size, keep in mind that another small business loan requirement is typically collateral to back your loan. Collateral usually takes the form of equipment, real estate, or inventory, which the lender can take in case of nonpayment, typically collateral is needed when dealing with a traditional bank. Alternative lenders have non-collateralized options that may suit your needs especially if you do not have collateral available to secure your loan.

Personal Credit Score

Though your personal financials may seem irrelevant, don’t underestimate the importance of having a solid credit score—even if your business is an LLC or corporation.

Why? Because banks like to see how you handle your personal finances, as it’s an excellent indicator of how trustworthy you are when handling a loan. Personal credit is also one of the most critical requirements for a startup, a business type that often faces additional challenges securing loans.

A minimum credit score of 600 will give you access to a wide variety of loans, though this number is by no means a cutoff. And having a credit score above 700 opens the doors to many different loan options.

Got less than stellar credit? Don’t be discouraged if you’ve had issues in the past, as other financing options exist for those business owners. You can speak with a Business Financing Advisor at ROK Financial to help find an option that works for you.

Time in Business

How long has it been since you opened for business? Time in business is perhaps one of the most critical qualifications you’ll have to meet when applying for a business loan. Most lenders will only qualify you if you’ve been in business for two years, which is usually the minimum to make lenders feel comfortable about your business potential.

If you’re a newer business, there may still be some options for you. Some alternative lenders will qualify you with just one year of business under your belt. Applying for a loan with anything less than that? You’ll have to present a strong application demonstrating the importance and potential of your business.

ROK Financial’s popular financing options require only 6+ months in business!

Revenue / Gross Sales

As you may have already guessed, you will be asked to account for revenue or gross sales as part of your small business loan qualifications. When it comes to breaking down how to qualify for a small business loan, banks are interested in seeing that you’re making money to gauge whether you will be able to repay the loan.

Apart from revenue information, your balance sheet will provide valuable information about your assets, liability, and owner equity. And while lenders are interested in your demonstrated history, you’ll also have to project your revenue and expenses for the next three to five years.

If you choose to apply with ROK Financial, you’ll need to provide recent bank statements showing at least $15,000 monthly gross revenue, or $180,000 in annual gross sales.

Small Business Financing Options

Deciding which small business financing option is right for you is a critical part of securing capital. There are a variety of loan types to suit the needs of business owners, and some of the most common include:  

  • Business Line of Credit
  • Government SBA Loans
  • Merchant Cash Advances
  • Term Loans
  • Equipment Loans
  • Unsecured Business Loans
  • Working Capital Loans

SBA Loan Requirements

Government small business loans from the U.S. Small Business Administration (SBA) are another attractive option that deserves a special mention. You have to meet special requirements to qualify for an SBA loan, some of which include:

  • Having a for-profit business status
  • Having U.S-based locations and operations
  • Meeting SBA size standards
  • Operating in an SBA-acceptable industry
  • Having exhausted other funding options

While applying for an SBA loan can be a demanding process, there are plenty of reasons to do so. First, you’ve just got to know how to qualify for a small business loan. These loans are usually easier to qualify for, and they offer lots of advantages, such as competitive terms, unique benefits, and business counseling.

Ready To Get Started?

If you’re not sure what the best financing options would be for you, that’s OK! Our team of Business Financing Advisors at ROK Financial can help you find the best business loan at no cost. Please complete our 15-second application to get options in just minutes and funding in hours!

About the Author, Madison Taylor

Madison Taylor is the Brand Ambassador at ROK Financial. She is responsible for raising brand awareness and business relationships with business owners across the country. Madison loves that she plays a small role in getting Business Back To Business Through Simple Business Financing and looks forward to hearing what you think about the blogs she creates! Madison has been working in the financial space for six years, and loves it! When she is not at work, you will find her at home learning a new recipe to test out on her family or going on new adventures with her friends.