Business loans have more requirements compared to a personal loan. This is because lenders face more risk with business loans. Thus requiring business owners to provide documents to help assure the lender of their capability to make payments. Let’s go over the typical requirements for business loans.

Credit score

Lenders review their borrower’s credit score to see their ability to make payments if they are approved for the loan. If you’re applying for a loan to start a business, the lender will review your credit score.

Business age

If you are applying for a business loan from a bank, your business age should not be less than 24 months to be approved. Anything less than that may qualify for a startup loan instead. The older the business, the better for the lender.

Annual revenue

When applying for business loans, the lender may ask you how much your yearly revenue is. Often they need to see an annual income of $50,000 to $150,000. Your receipt will show the lender your margin for paying that business loan you are applying for.

Potential collateral

Secured business loans always require insurance. Business assets serve as a protection to the lender in case you default your loan. If you do not wish to use insurance, you may apply for an unsecured loan instead.

Purpose of the loan

You will also need to explain why you are taking out the loan. It is better to explain to the lender how you intend to use the funds from the investment. This will also help the lender determine if they’ll grant the loan or suggest a different type of loan.

To ensure loan approval, you have to make sure you provide all the information and documents that your lender requires and make sure you are taking out the right kind of loan. First time applying taking out a business loan? Give yourself time to research the types of credit and their differences.