Lenders look at several different factors to determine if you’re ready to take on new debt. Typically, they want to see strong annual or monthly revenue, as well as a low level of existing debt.
Most lenders also examine your personal credit score and history, as well as the business itself. If your business is a startup, you may need to provide a personal guarantee. This holds you and any co-owners personally responsible for repaying the loan, even if your business can’t.
A detailed business plan can help you sway lenders by showing your ability to pay back the funds. This plan should include a five-year forecast of cash flow, income and expenses. Lenders will also ask to see your business’s bank statements, as well as any collateral it might have that can be used to secure the loan.
Lastly, most lenders have set revenue requirements that your business must meet each year to be eligible for funding. For example, online lender OnDeck has a minimum annual revenue requirement of $100,000. This helps lenders know if your company has enough money left over after paying for its own debt and other expenses to support the repayment of a new loan.
Some lenders will only lend to businesses that are in certain industries. These typically include adult entertainment, drug dispensaries and products, gambling and money service businesses. Others are willing to fund businesses that operate in almost any industry, but might require a higher down payment. small business loan requirements