Small businesses need help now more than ever, and that may mean a loan to help you through these challenging times. The good news is that you have plenty of options as long as you know how and where to get a small business loan.

You may want to start by setting yourself up for success through learning the small business loan requirements and what you can do to improve your standing.

Requirements to Apply for Small Business Loans

While specifics may vary slightly, the general small business loan requirements include the same primary elements.

Credit Scores

Since you assume responsibility for the small business loan, your credit score matters and plays a large part in determining the loan amount. Keep in mind that if you have more than one owner, the bank will want to see credit scores for everyone, along with the overall business credit score.

Before heading to the bank to apply, it may be in your best interest to check your credit report for any inaccuracies. Also, if you are close to a higher threshold, you may want to take steps to boost your score that little bit.

Business Banking Records

The bank needs to see your business banking records to assess the foundation and assign a rating, which determines how much the business can borrow. Try to abide by the following tips to make sure you are in good standing:

  • It’s ideal to maintain a steady balance with regular deposits to demonstrate consistent revenue and responsible financial management.
  • Present a balance sheet showing assets, liabilities, and owner equities. Try to reduce liabilities as much as possible before applying.
  • Avoid overdrawing your account and set up overdraft protection.
  • You may want to ask for a bank reference from your company’s banking institution. It could go a long way in convincing a lender.
  • Of note, most lenders like to see companies in business for two years, so you may be asked to show time in business as well.

Keep in mind that there are key numbers the bank will look at when determining your rating and loan amount. Lenders like to use a broad approach, so they will want annual gross sales along with monthly numbers for the following:

  • Gross margin
  • Cash flow
  • Debt to equity ratio
  • Accounts payable and accounts receivable
  • Earnings

Industry Size Standards

To qualify as a small business, you need to meet the size standards for your industry. Each industry has unique standards for the number of employees you can carry and still be considered a small business. Make sure you know the size standards for your industry and abide by that number.

List of Collateral and Assets

Some lenders ask for collateral while others do not. However, most lenders request that you list company assets on the application. They want to know what could cover your obligations in the event you can’t repay the loan.

Business Plan

Numerous SBA loans require you to furnish a business plan. Even if it’s not a requirement for your application, you may want to include it to round out your application. It’s an excellent way to show the lender how streamlined your operations are and how you actually make money.

What Is Your Best Option?

Even if you don’t fulfill all of the small business loan requirements, like time in business, you have options. Some companies may have unique options, like small business loans for women.

Lump-Sum Loans

Traditional business loans provide the funds as a lump sum and set you up with a repayment plan. Keep in mind that it can take a bit of time to secure a small business loan, so if you need the money sooner, you may need to go a different route.

Business Line of Credit

Instead of taking on a loan, you could get a business line of credit that provides access to funds sooner. You can spend up to the established amount and pay interest on what you use.

SBA-Backed Loans

SBA-backed loans open doors that traditional lenders don’t. There are three primary types with unique qualifications and arrangements.

  • SBA 7(a) loans, the most common type, have set requirements, including having real estate as part of the business purchase.
  • SBA 504 loans offer long-term, fixed-rate financing for specific purposes, like real estate or machinery repairs.
  • SBA microloans are smaller, $50,000 or less, and earmarked for startups or expansions.

Secured Business Funding vs. Unsecured Business Loan

You may hear these terms tossed around as you research options. The difference between a secured and unsecured business loan is collateral. Secured business funding options require collateral to get the loan, while unsecured business financing usually involves a credit card or line of credit.

How to Obtain a Small Business Loan with Bad Credit

Though most lenders require a personal credit score between 600 and 680, having bad credit doesn’t mean you’re out of luck. It’s possible to secure financing through alternative lending sources, even with a lower credit score.

If you apply online with an alternative lender, you may pay a higher interest rate, but they will look at the whole picture of your business, primarily annual revenue, cash flow, and any collateral you can provide (but is not necessary).

Where to Apply for a Small Business Loan

Knowing where and how to apply for a small business loan can be overwhelming, but with a little research, you can get there. ROK financial offers various options to meet your business needs, without the restricted qualifications most banks require.  Apply now to connect with a knowledgeable financing advisor who can help guide you through the process.

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.