Did you know there are about 28.8 million small businesses in the United States?
Obtaining the proper financing is crucial for a small business to thrive. If you own a small business, getting a loan can help take your business to the next level.
If you’re looking for ways to apply for a business loan, you came to the right place. Read on to learn about the qualifications for a small business loan.
1. Overall Credit Rating
Business owners who want to secure a business loan need to keep an eye on their credit score. Although plenty of lenders can provide a loan for business owners with low to fair credit, they come with high-interest rates.
If you’re in the process of acquiring a new business loan, you must take a look at your credit history. To qualify for a business loan, you will need a credit score of at least 600.
However, most lenders look at your credit score and credit history before giving you a loan. If you believe your credit score is not as high as you’d like, taking measures to improve can secure you a lower interest rate. Learn how to get a small business loan.
2. Business Cash Flow
Besides your credit score, lenders will also take a look at your business’s cash flow. Banks and other lenders want to make sure your business makes enough to cover the re-payment of the loan.
Before you request a business loan, you should have the proper bank statements that show your business’s income. Aside from showing proof of income, you will also need to show your current expenses.
The bank will want to see how much money your business makes and how much money goes out the door. If your expenses are too high, it might make it more difficult to get a loan.
3. Age of Your Business
Because 20 percent of small businesses fail their first year, most lenders will consider your business’s age before approving you for a loan. Some lenders will require you to have been in business for at least six months to two years before approving you for a loan.
Keep in mind that lenders will want you to have a business account established for the minimum amount of time to consider you.
4. Overall Debt
Before you can get approved for a small business loan, lenders will consider your overall debt. The debt-to-income ratio is one of the most important factors a lender will consider before approving you for a loan.
If your debts are too high, it might disqualify you from qualifying for a business loan. Generally, you will want your debt-to-income ratio to be 50% or lower.
These Are the Qualifications For a Small Business Loan
Now that you know the qualifications for a small business loan, you’re ready to apply for one.
Remember, to qualify for a business loan; you need to consider your credit score, age of your business, cash flow, and debt-to-income ratio.
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