Do you know what it takes to get a business loan for the full requested amount? Of the 43% of small businesses that applied for loans in 2019, 14% received only partial funding; 9% got nothing at all.
If you want a loan to grow your business, it’s best to go into the application process knowing what’s required to qualify.
What does it take to get a business loan from a bank? You’ve probably heard the answer broken down into the “five C’s” of credit: character, capacity, capital, collateral and condition.
To evaluate these aspects of creditworthiness, banks require a long list of documents.
Although minimum qualifications differ depending on the institution and the type of loan you’re requesting, banks usually require:
SBA loans have additional requirements, including meeting the organization’s small business size standards.
Online loan options available through fintech lenders are usually easier to access than bank loans. What does it take to get a business loan if you apply online?
Most small business lenders ask for:
FICO score requirements range from no restrictions to over 600 for certain loan types.
To qualify with a very low credit score, you may have to meet certain revenue or time in business criteria. Some online lenders will only work with businesses that have been established for at least a year. Others work with startups, or waive the time in business stipulation for applicants with great credit scores.
Once you submit your application and the related documents, the lender begins the underwriting process.
Underwriting involves a review of your personal and business information to determine if you qualify. The lender’s final assessment determines whether you get a loan offer and, if so, the rates and terms for which you qualify.
Banks are known for their lengthy underwriting processes. It may take anywhere from a few weeks to several months for a bank to evaluate:
Large banks approve only 26.9% of loan applications; small banks have a 50.6% approval rate. Your chances of qualifying are better if you already have an ongoing relationship as a customer of the bank. Rejection is more likely if you request a small loan amount, have bad credit or operate in a high-risk industry.
The bottom line with banks is simple: risk. This process determines if you follow through on financial or business commitments, and have stable cash flow to avoid defaulting.
Fintech lenders ask for fewer documents upfront, but place a stronger emphasis on future opportunities. While they may consider your company’s current financial state, they’ll look most at how this capital could help you generate higher revenue. As a result, industry approval rates are closer to 70%.
With technology as an integral part of the underwriting process, fintech lenders can evaluate:
Some fintech lenders use automated approval processes based on algorithms, in which case you may be able to qualify instantly. Others offer 24-hour approval, and you can generally get cash from the loan deposited in your business bank account within one day to one week.
You may be asked to provide more documentation if the lender needs additional details, particularly for larger amounts. Underwriting will take longer in these cases, but you should still receive funding in lightning-fast time windows, compared to banks.
The same process applies when small business owners apply for other financing options, like equipment loans, business lines of credit, and more.
Through National Business Capital & Services, you can get access to small business funding in as little as 24 hours.
What does it take to get a business loan from National?
Most programs have low or no FICO requirements and are suitable for both new and established businesses. By accessing multiple loan options from a global marketplace of over 75 partners, National can connect your business with the right loan at the right price.
Fill out the 60-second application to get started today!
National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.
We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!
Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!