How Hard is it to Get a Business Loan?


Whether you’re just starting out with your company or you’re looking to expand your business, a business loan can help you get the funding you need to take things to the next level. Before you start applying, though, you might be wondering how hard it is to get a business loan.

The answer is: it depends. As with any type of credit, there are several factors that go into a business loan approval. In general, though, the longer you’ve been in business, the better established your personal and business credit histories are, and the better shape your financials are in, the higher your chances of getting approved.

Business loan approval factors

If you’re looking to get approved for a business loan, your chances of qualifying can vary depending on the type of lender you choose and your financial and credit situation. Here are some common factors commercial lenders look at when reviewing your application.

Credit history

Having a solid business credit history can help boost your chances of getting approved for a business loan with favorable terms. But many lenders also take a look at your personal credit score and report to get an idea of how you manage your money. That’s especially the case if your business is brand new and doesn’t have a credit history yet.

If your personal credit history isn’t in good shape, it can be a sign that you’re not responsible with credit, and they may be hesitant to lend money to your business. If your credit is excellent, however, it shows lenders that while running a business is risky, you’re good for paying back the money if your business fails.

Time in business

If you’re looking to get a business loan from a traditional bank or commercial lender, you generally need to have been in business for a few years to be considered for approval.

Some online and alternative lenders have lower requirements — some don’t even require that you be in business for a certain period at all — making them worth considering if you’re just starting out.

But think about it: lenders that require you to be in business for a while typically view you as less of a risk, so they can afford to offer lower interest rates. On the flip side, lenders that are willing to provide loans to new business owners may charge high interest rates to compensate for the risk that you might fail.

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Annual revenue

In general, commercial lenders want to know that you’re not only capable of staying in business, but also that your company’s cash flow is strong enough to afford the monthly payments. To give them an idea, you may be required to provide proof of your annual revenue, in addition to revenues you’ve earned over the past few months.

Loan amount

As a business lender considers the other factors we’ve discussed, they’ll also consider how much you’re asking for. If your business is brand new, for instance, you may be approved for much less than you might get if your business has been around for five years and has strong financials.

Asking for more than you qualify for isn’t necessarily grounds for an outright denial, however. Instead, the lender might give you a counteroffer with a more reasonable amount.

Approval odds by loan type

Getting a business loan doesn’t just depend on you and your business. It also depends on the type of loan you’re trying to get. Here are some common business loans and what your chances are to get approved.

Merchant cash advances

From a credit standpoint, merchant cash advances are easy to get. You also typically don’t need to have been in business for a long time. Where you might get hung up, though, is with revenue.

Merchant cash advances are an advance on your future credit card sales, which means that you need to have pretty solid sales to begin with for the lender to expect to be able to collect. The actual revenue figure can vary by lender but expect to have a tough time if you’re a startup with few sales so far.

If you do qualify, though, keep in mind that merchant cash advances are among the most expensive business loans.

Invoice financing

Another secured business loan, invoice financing essentially represents an advance on an unpaid invoice. For example, if you have an invoice you’re expecting to get paid for within two months, you can usually get up to 90% of its value through invoice financing, which is paid back when you get paid.

Because invoice financing is relatively secure for the lender, it’s easy to qualify for compared with more traditional business loans. Keep in mind, though, that invoice financing can be expensive.

Short-term loans

Short-term loans can help you get financing in a pinch and can be easy to get with some lenders. That’s primarily because the time horizon for the lender to get its money back isn’t very long, reducing the overall risk of the loan.

That said, they’re tougher to get than merchant cash advances and invoice financing because you the lender still needs to know that you’re able to repay the debt. As a result, many lenders that offer short-term business loans require that you be in business for at least six months to a year and have a track record of stable revenues.

Equipment financing

When financing equipment, the equipment typically serves as collateral for the loan. Depending on the amount of the loan, you might also qualify for a long repayment period.

Because equipment financing is relatively safe for lenders, you can usually expect favorable terms. But to qualify, you need to show a history of strong revenues and have a relatively good credit score.

Term loans

Term loans can be difficult to get if you haven’t been in business for very long, especially if you’re trying to apply with a traditional commercial lender. To get favorable terms, you typically need to be in business for at least a year or two, or sometimes more, have a good credit score, and maintain strong revenues.

SBA loans

Loans guaranteed by the U.S. Small Business Administration are among the difficult to qualify for, but they’re also some of the best in terms of interest rates and other terms. To qualify for an SBA loan, you’ll need to have been in business for two or three years, have good or excellent credit, and have strong and stable revenue streams.

The bottom line

When it comes to the question of how hard it is to get a business loan, there’s no one-size-fits-all answer. That’s because it can vary based on the type of loan you’re applying for and the factors different lenders consider.

As you consider different options, it’s important to take your time to research several business loans. If you’re thinking about applying with a lender but aren’t sure about their requirements, considering calling them. They might not give you all of their criteria, but they may be able to give you an idea of your approval odds.

If you don’t qualify for the type of loan you want, consider working on improving your personal and business credit histories, as well as your business, to boost your chances of qualifying the next time you need financing.


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