Small business loans are one of the most popular ways for entrepreneurs to get the money they need to start a business and keep it running. Yet, despite the importance of accessing capital, some small business owners struggle to qualify for funding. In 2021, just 31% of business applicants received all of the funding they applied for according to a report by the Federal Reserve. 

On a positive note, there are many possibilities to consider where small business financing is concerned, and there’s a good chance you’ll be able to find a lender that’s willing to approve your business for some type of financing solution. 

If you’re wondering how hard it is to get a business loan, the answer depends in large part on the type of business loan you hope to take out. Your business details also play a significant role in the type of financing your company may be eligible to receive. Read on to learn more about business loan approval factors that lenders may consider.  This guide also includes details about approval odds for different types of business loans and how to discover whether a loan offer is an affordable financing solution for your company.

Business loan approval factors.

When you apply for a business loan, a lender may evaluate various factors to determine whether to approve or deny your application. After a loan approval, the factors below may also influence your loan’s interest rate, loan amount, and repayment term. 

Credit score and credit history (business and personal)

Lenders will review your personal and business credit score when evaluating a business loan application. A higher credit score will make it easier to qualify for a loan, especially if you have a consistent credit history. Minimum credit score requirements vary by loan type and lender. Equipment financing minimum requirements start in the 500s with SBA loans starting at 650.

Business revenue

Lenders will want to see a steady stream of revenue, so they know you will have the ability to repay the loan. Just like credit scores, the minimum revenue requirement will vary, but a minimum of $8,000 in monthly revenue is a good rule of thumb.

Time in business

Lenders inherently take on risk when loaning money to a business, so they want to ensure your business will still be around to pay off a loan. For larger, long-term loans, such as an SBA loan, lenders will want to see a minimum time in business of two years. For smaller, short-term loans, such as a business cash advance, funders will want to see a time in business of at least six months.

Collateral

Collateral acts as a guarantee for the lender that if you default on the loan, the lender will be able to recoup their assets by claiming an asset such as equipment or property. 

Industry

Certain industries can be seen as riskier than others depending on the nature of the industry and external factors such as the economy and government restrictions.

More established businesses with good credit, higher revenues, and lower overall risk profiles can typically borrow more money and qualify for better loan terms. Startups and businesses with bad credit—or other types of high-risk borrowing profiles—may face higher interest rates and lower loan amounts and struggle to qualify for certain types of financing.

Approval odds by type of business loan.

Getting approved for a business also depends on the type of loan you need. Below are several popular business financing products, along with your basic odds of getting financed. 

Accounts receivable financing

Sell your outstanding invoices to get cash flowing now. This is a great option for businesses with large accounts receivable.

Time in business

Any

Minimum credit score

N/A

Minimum monthly revenue

$8,333

Collateral requirements

Invoices act as collateral

Equipment financing

Finance your purchase of business equipment, vehicles, and electronics. Pay your loan back in regular monthly payments over a set term plus interest.

Time in business

0-1 Year

Minimum credit score

520

Minimum monthly revenue

$0 – $8,333

Collateral requirements

The equipment acts as collateral for a lease and a portion of collateral for a loan.

Business credit card

A business credit card helps you track expenses, build a strong business credit history, and increase your working capital so you can reap the literal rewards.

Time in business

0-2 Years

Minimum credit score

650

Minimum monthly revenue

Varies

Collateral requirements

None

Business cash advance

Get an advance on your future sales earnings to get fast financing, and pay it back with a fixed daily percentage.

Time in business

6 Months

Minimum credit score

500

Minimum monthly revenue

$8,333

Collateral requirements

None

Business line of credit

Get a revolving amount of funds to borrow from when you need to and pay back later. Great for working capital and regular short-term expenses.

Time in business

6 Months

Minimum credit score

600

Minimum monthly revenue

$6,000

Collateral requirements

Varies

Business term loan

A term loan provides a lump sum that gets repaid in regular intervals over a set amount of time, also known as the loan term.

Time in business

1 Year

Minimum credit score

600

Minimum monthly revenue

$8,000

Collateral requirements

Usually required

SBA loan

Invest in longer-term small business growth or even refinance existing debt with a loan that is partially government-backed. An SBA loan has stricter requirements and is usually paid back over a longer term with lower rates than other loans.

Time in business

2 Years

Minimum credit score

640

Minimum monthly revenue

$8,000

Collateral requirements

Required for loans greater than $50,000