Wealthy Credit Limited
Business Loan
Requirements
What do you need to qualify for a business loan? Gather these business loan requirements before applying to increase your chances of approval.
When applying for a business loan, it's wise to apply before you need it. However, you must come prepared—many business owners fail to meet loan requirements when they need cash because they haven’t prepared adequately.
Assemble the necessary documents and information well in advance. Additionally, understand the lender’s specific guidelines before seeking capital.
Interested in qualifying for a business loan? Have the following documents and information ready
1. Credit Score
Most lenders believe that past performance predicts future outcomes. They use personal and business credit scores to assess this. One of the main business loan requirements is for both the company and the owner to have strong credit scores. According to lenders, a lower credit score signals higher risk. (For companies, an excellent score is above 80. For business owners, a good personal credit score is above 750.
Lenders want to know how the loan will be used and how the company plans to grow. You should be able to thoroughly discuss the age and stability of your company in its industry.
You can access your personal credit reports for free once a year online and dispute any inaccuracies through the credit bureaus’ websites. Businesses can check their scores at the three main credit bureaus: Experian, Equifax, and Dun & Bradstreet.
Over time, you can improve your personal credit score by paying all bills on time and maintaining a low personal debt-to-credit ratio. Businesses can enhance their scores by keeping their information current and building more vendor relationships in their credit records.
2. Annual Revenue
One of the primary business loan requirements for a lender is to understand the trends in your business, particularly how sales and cash flow have grown.
Ensure you have accurate monthly financial statements from the past two years available. Lenders will review specific metrics like the current ratio, which is current assets divided by current liabilities. (A ratio greater than one indicates your company’s ability to pay its bills.)
Many lenders may also request copies of your bank account transactions to verify cash flows shown on your financial statements. Remember, business loan qualifications often rely more on cash flow growth than revenue.
3. Updated Business Plan
Lenders want to understand how the loan will be used and how the company plans to grow. You should be prepared to discuss the age and stability of your company within its industry. The business plan should include projected financial statements and repayment strategies.
Be sure to include the resumes of key managers and explain their impact. Despite all the financial numbers and documents, one of the critical business loan requirements is the experience of the people responsible for repaying the loan.
4. Additional Collateral
Every lending source aims to reduce its risk when issuing a loan. One way they achieve this is by securing additional financial collateral in case your business fails to meet its repayments. This often includes accounts receivable, equipment, or other easily sellable assets.
An additional business loan qualification may require the company’s owner to provide a personal guarantee or pledge collateral, such as real estate or financial assets.
While these four are significant, other required documents include:
- your driver’s license,
- commercial leases,
- business licenses,
- personal and business tax returns,
- business insurance plans,
- payroll records,
- incorporation documents,
- other corporate ownership affiliations,
- current financial obligations.
Ensure you are as prepared as possible and meet all business loan requirements before applying.