eCredable Business Blog

eCredable Business Blog


Learn how to build business credit and access more business financing.

How Hard Is It to Get a Business Loan? 

One of the first questions many small business owners have is, “How hard is it to get a business loan?” 

The answer relies upon four key factors — how long you’ve been in business, revenue, personal and business credit scores, and the loan amount.  

If you’re a new business owner with a small amount of revenue and little to no credit, it will likely be difficult to get a business loan.  

However, if you’ve been around for at least two years and have solid revenue and good credit, getting a business loan should be fairly easy.  

For more details, read on.  

Business Loan Approval Factors 

Time in Business 

Generally speaking, a lender will prefer well-established businesses over new ones.  

“While minimum time requirements vary, it’s common for traditional lenders to require you to have at least two years in business,” writes Forbes

That said, “online lenders often require applicants to be in business for at least six months to a year.” 

The bottom line is that if you’re going through a traditional lender, you’ll usually want to have two years of business operations under your belt.  

But if you’re opting for an online lender, as little as six months may be sufficient. (Keep in mind that online lenders usually have very high interest rates and fees.) 

Cash Flow 

The more cash flow you have, the more attractive you are to lenders. But the exact amount you need depends largely on whether you’re applying for a business loan with a traditional bank or an alternative lender.  

To quantify, a traditional lender such as a bank will typically require a minimum of $100,000 in annual revenue.  

However, many alternative lenders require substantially less, with some small business owners being eligible with just $33,000 to $50,000 in annual revenue.  

Personal Credit 

Just as your personal credit is a major factor in determining your eligibility for a personal loan, the same is true when applying for a business loan.  

While the exact weight a lender will place on your personal credit will vary, most will take it into careful consideration, as it provides insight into your overall creditworthiness.  

So, the higher your personal credit score is, the more likely you are to be approved for a business loan.  

Besides that, having a strong personal credit score can help you secure more favorable business loan terms, lower fees, a higher credit limit, and so on.  

More specifically, if you want business funding from a traditional bank or credit union, you’ll usually need to have a personal credit score of 680 or higher.  

A score in the mid-600s should make you eligible for an SBA term loan.  

And a score in the mid-500s should make you eligible for a business loan from an online lender, especially if you have strong overall financials.  

Just note that you’ll likely encounter less favorable loan terms and higher fees if you have poor credit. It’s also harder to get an unsecured loan when seeking small business financing, and a lender is more likely to require collateral.  

Business Credit 

As for business credit, the same principles you’ll find with personal credit apply here. The better your business credit is, the easier it is to qualify for a business loan.  

However, unlike a personal credit score, which typically ranges between 300 and 850, a business credit score usually ranges from 1 to 100.  

For example, one of the most common business credit scores lenders look at is the PAYDEX Score from Dun & Bradstreet.  

“To be eligible for loans and decent credit ratings, this particular score should fall within the 80 to 100 range,” explains Bankrate. Anything lower than that may indicate difficulty with making payments. Businesses within the 0 to 49 range are considered high-risk and would dissuade investors or lenders.” 

Note that a simple way to raise your business score is by making utility and telecom payments (something many small business owners do anyway) using a tool like eCredable Business Lift.  

With eCredable, you can have payments for electricity, water, gas, internet, and more reported to multiple credit bureaus simultaneously.   

Once you’ve signed up, we’ll attempt to download up to 24 months of your payment history to give your business credit score an initial boost. 

And as long as you continue to pay your bills on time, this should help you build an even stronger business credit history.  

In turn, this should make it easier to qualify for a small business loan, as well as other types of funding like a business credit card, business line of credit, invoice financing, and more.  

To learn more on this topic, we suggest reading this resource about how to build business credit in 30 days.  

Loan Amount 

Finally, the size of the small business loan you request will also affect your likelihood of being approved.  

The lower the loan amount, the stronger your chances of approval, and vice versa.  

For perspective, most lenders will offer a small business owner a loan ranging between 50% and 100% of their average monthly revenue.  

Note that some may be willing to offer more, but they usually require a secured loan with collateral and a high level of creditworthiness.  

Ranked Types of Business Financing by How Easy It Is to Get Approved 

1. Equipment Financing 

Because the equipment that’s being financed usually serves as collateral, there’s minimal risk for a lender.  

As a result, this makes equipment financing one of the easiest types of funding to get and number one on our list.  

When compared to more traditional business financing like an SBA loan or a bank loan, you’ll find that equipment financing tends to have less rigorous qualification criteria. 

This means it’s often a good option for new small business owners who need to obtain key equipment and don’t want to deal with a complicated loan application process.  

It’s also beneficial because it can help you build business credit, which can open more doors in the future for things like additional business loans and a business credit card with favorable terms. 

Just note that you’ll still usually need to have a fairly good personal credit score if you’re starting a new small business. Or if you’re already established, you’ll need to have a reasonably good business credit history.  

2. Merchant Cash Advances 

A merchant cash advance isn’t technically a business loan in the conventional sense.  

Instead, a lender gives you cash upfront, and you repay it using a percentage of your sales along with a fee.  

But the premise is very much the same, and a merchant cash advance can be an effective way to generate quick cash flow.  

And because many lenders are fairly lax with their eligibility requirements, a merchant cash advance is fairly easy to get.  

According to Small Business Funding, to be eligible, you simply need to:  

- Have been in operation for at least 3 to 6 months 

- Make a minimum of $8,000 to $15,000 in monthly revenue 

- Have a personal credit score of at least 550 

- Have a business checking account  

Note that funding from many merchant cash advances can also be received in as little as 24 to 48 hours, and the loan application is pretty straightforward.  

So, if you’re looking to boost your cash flow in a hurry, this is a type of business funding to consider.  

It’s worth noting that this type of business financing is particularly expensive. The fees are some of the highest that you’ll find of any financing type - equivalent to 100% APR or more. For that reason, it’s best to steer clear of merchant cash advances unless you absolutely need the capital.  

3. Short Term Loans 

As the name implies, short term small business loans have shorter repayment terms than long term small business loans.  

In most cases, this will range anywhere from a few months to two years.  

Because lenders recoup their money quickly with short term loans, it reduces their risk level.  

As a result, lenders tend to be less strict with their qualification criteria, making a short-term loan easier to obtain.  

They work especially well for business owners needing access to fast funding to fill cash flow gaps and that want a relatively simple loan application process.  

Just note that you’ll still usually need to have established a baseline level of creditworthiness and have been in business for at least six months to qualify.  

Also, you can generally expect to pay higher interest rates with a short loan term because of the short repayment period.  

4. Business Lines of Credit 

Although stricter with eligibility requirements than equipment financing, merchant cash advances, and short-term loans, business lines of credit are still fairly easy to obtain when compared to SBA loans and traditional bank loans.  

According to National Business Capital, “You will typically need to have at least a year in business, a 600+ FICO score, and a minimum of $120,000 in annual revenue.” 

In some cases, business credit lines may also require collateral like real estate or business equipment if you have less-than-ideal financials.  

But overall, the requirements are pretty reasonable, and these particular business tradelines provide an efficient way to obtain funding and improve cash flow.  

We also like them because they help build business credit.  

As long as a lender reports your payment history to at least one major credit bureau and you make your payments on time or in advance, this can boost your business credit and potentially unlock more financing opportunities such as a low-interest credit card.  

And if you’re looking to build business credit without using personal credit, business tradelines are an excellent way to do so.  

5. SBA Loans 

The Small Business Administration is, admittedly, more strict with its eligibility requirements than many other lenders.  

To qualify, you’ll typically need a clear, focused business plan, have been in business for at least two years, have good to excellent credit, and generate a minimum of $100,000 in annual revenue. 

For this reason, an SBA loan probably won’t be viable if you’re a new small business owner just getting started and lacking a concrete business plan.  

But if you meet the right criteria, an SBA loan can be an excellent financing option, as you’ll often encounter lower-than-average interest rates and more favorable business loan terms than what you’ll get from many other lenders.  

We also like that the SBA often offers extended repayment terms to provide some wiggle room when paying back a loan. And in many cases, businesses that don’t qualify for a traditional bank loan may qualify for an SBA loan.  

Also, note that if you’re looking for a fast approval time and are okay with a lower maximum loan amount of $500,000 (as compared to $5.5 million with regular SBA loans) you may want to consider an SBA Express Loan. 

You can learn more about SBA loans here.  

We should also mention that the Small Business Administration offers comprehensive educational resources and assistance to business owners, which is an added plus.  

So if you’re looking to educate yourself along the way, the SBA is a great choice.  

6. Traditional Bank Loans 

This tends to be one of the first types of financing that comes to mind for many new small business owners. Bank loans usually have the lowest interest rates and sometimes offer high loan amounts. 

It’s also one of the most difficult to get.  

According to Venturize, “Banks usually require strong personal and/or business credit scores, a personal guarantee, collateral, and healthy financials.” 

They also report that 72% of small business owners that apply for a traditional bank loan are rejected.  

Combine that with the meticulous nature of applying for a traditional bank loan and a lengthy processing time of several weeks, or in some cases, multiple months, and it can be intimidating, to say the least. 

That said, this type of financing is always a possibility as long as you meet the requisite eligibility requirements and are well-established with a clear business plan.  

But this likely won’t be your first choice if you need quick financing and don’t wish to jump through a bunch of hoops.  

Closing Thoughts 

How hard it is to get a business loan varies depending on multiple factors and the specific type of small business loan you’re applying for.  

While a lender like a traditional bank won’t likely be realistic for a brand new small business owner with bad credit, odds are there’s at least one loan option that you qualify for.  

It’s just a matter of finding a small business loan that matches your specific needs and that has realistic eligibility requirements.  

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