How Hard Is It to Get a Business Loan in 2024?

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








FAQs











What are the odds of getting a business loan?





Certain business loans have a reputation for being difficult to qualify for while others feature qualification criteria that tends to be much easier to satisfy. Details such as the type of business loan you want, the loan amount you’re seeking, and your desired repayment terms can impact your loan qualification odds. Furthermore, if you’re a low-risk borrower (Ex: you have good credit, higher revenue, or more time in business), you may have better loan options.



  










Can an average person get a business loan?





There are many different types of business financing options. So, there’s at least a chance that the average business owner may qualify for some type of business financing. However, if your business is not yet able to satisfy a lender’s approval criteria, you can work to improve your credit and other factors to put your company in a better borrowing position for the future. 



 










How much income do you need to get a business loan?





Every lender sets its own approval criteria when it comes to business loans. Some business financing options require your business to bring in at least $8,000 worth of revenue each month. Yet other loan types can be much more lenient where revenue and income requirements are concerned.










What credit score is needed to get a business loan?





The higher your credit score, the more options you should have where business loans are concerned. However, some lenders may be willing to work with you if you have a credit score of at least 500. And in some cases, a business lender may not have a minimum credit score requirement at all. 
























Quickly compare loan offers from multiple lenders.



Applying is free and won’t impact your credit.





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Information provided on this blog is for educational purposes only, and is not intended to be business, legal, tax, or accounting advice. The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. While Lendio strivers to keep its content up to-date, it is only accurate as of the date posted. Offers or trends may expire, or may no longer be relevant.
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