If you have an idea for a start-up business, or a plan for expanding an existing business, your ability to pursue your goals is could well depend on your ability to get financing. A clear understanding of small business loan requirements can give you the edge you need to clear this crucial hurdle.

Your Business and You

While a business loan is different from a personal loan, you are likely to find that your ability to secure small business financing depends very much on your personal characteristics and history.

For one thing, in the absence of an established track record for a business, a lender's willingness to extend your company credit is going to depend very much on your financial situation. This includes your current debt load and history of paying your debts. It may also include your ability to provide personal assets as collateral.

Another way a small business loan may depend on you personally is your ability to convince the lender that your plan for the business is viable. This comes down to your education, your experience, your ability to put together a well-conceived plan and your credibility in presenting it.

A small business loan may be a commercial transaction, but like many small businesses themselves, it is often highly personal to the business owners.

Typical Small Business Loan Application Requirements

So what will lenders ask for when considering a loan for your business? The following are some typical small business loan application requirements:

  1. Your credit history. Unless you have a profitable, well-established business, your personal credit history may have to make up for the absence of a company financial history. So, before you try applying for small business loans, check your credit score (free at LendingTree) so you know where you stand and can address any problems.
  2. Business plan. Your company's ability to repay the loan will probably depend on the success of the business, so lenders are going to want to see your business plan. This should be a detailed strategic document which includes a marketing plan, competitive analysis and well-researched data on cost factors and price points.
  3. Balance sheet. Lenders need to see a list of the company's assets and liabilities so they can determine how well-resourced the business is and whether or not it is over-extended financially.
  4. Cash flow history and projections. A balance sheet is the equivalent of a financial snapshot at one point in time, but a cash flow statement is a more dynamic representation of whether a company is growing or stagnating, succeeding or failing. It is helpful if your business is well-established enough to have built up a cash flow history, but if not you will have to present credible projections that give the lender confidence in the company's ability to repay the loan.
  5. Resource management. The details of how your company processes payments and accounts payable shows a potential lender that you are (or are not) well-organized enough to make effective use of your resources.
  6. Collateral. Lenders are going to look for assets they can claim if you fail to repay the loan. It's best if the company itself has assets of sufficient value, but if not you may have to put up personal possessions as collateral.
  7. Skin in the game. Don't expect a lender to risk its money unless you also have invested significantly in the business.

Remember, the application process is largely about getting a lender to believe in you and your business. It is not just the substance of the above criteria, but also your thoroughness and organization in presenting them that can make a difference.

Small Business Administration Requirements

If you are turned down for a conventional loan, you may qualify for a Small Business Administration (SBA) loan. The SBA is a United States federal agency that does not make loans itself, but guarantees loans made through approved private lenders. That government backing gives lenders the confidence to approve loans they would otherwise reject. You can only be considered for an SBA loan if you demonstrate that you have exhausted your options for obtaining other possible sources of financing.

Here are some of the requirements for SBA loans:

  1. The business must operate for a profit.
  2. The company cannot exceed SBA size limits. These limits vary by industry, and may be defined in dollars or the number of employees. See the SBA's website for details on the size limits for each industry.
  3. Business must be conducted within the United States or its territorial possessions.
  4. There must be a reasonable base of invested equity.
  5. The applicant must demonstrate a need for the money and a legitimate business purpose for using it.
  6. The applicant must not be delinquent on any existing debt obligations to the U.S. government.

Whether you choose an SBA loan or private financing, applying for a small business loan requires careful planning and documentation. The rigor of going through this detailed examination of your business plan and resources may be almost as useful as the financing itself in putting your business in a position to succeed.

Get business loan offers in a few simple steps!
Get business loan offers in a few simple steps!

11 types of Business Financing

Category Amount Interest Repayment Effort Timeline Collateral
Bank Loans $200K+ < 10% 7+ years 25+ hours 
2-6+ months
Required. Preferably, real estate. Vehicles and marketable equipment can also qualify
Microloans $500 - $100K 8-15% 1-5 years 10+ hours 
 1-3+ month
Preferred but usually not required.
Term Loans $5,000 - $500,000 7% - 25% 1-5 years 1-2 hours A week Personal guarantee
Equipment Financing $5,000 - $5,000,000 8% - 25% 2-10 years 1-2 hours 
 1-4 weeks
Equipment
Cashflow Loans $200 - $100,000 25% - 90% 6 - 12 months Minutes  
7 minutes - 3 days
Personal guarantee
Merchant Cash Advance (MCA) $200 - $250,000 70% - 350% 3 - 12 months Minutes A week Not required
Revenue Loans $10,000 - $1,000,000 15% - 40% 1 - 3 years 10+ hours 
 A month or so
Not required
Receivable Financing 85% of AR 15% - 35% 1 - 3 months 1-2 hours 
 A few days
Account Receivables
Equity CrowdFunding $50,000 - $5,000,000 Equity 5+ years 25+ hours 
 3+ months
Not required
Reward CrowdFunding $1,000 - $100,000 Reward < 1.5 years 25+ hours 
 1 - 3 months
Not required
Startup Financing $1,000 - $300,000 3 - 50% 1-10 years 25+ hours 
 1 day - 1 month
Not usually required

Frequently Asked Questions

What is LendingTree?

By coming to LendingTree.com, you have accessed the leading online loan and realty services marketplace. LendingTree quickly connects consumers to Lenders (click for a list) who compete for your business. LendingTree Lenders offer an array of loan types, including mortgages, home equity loans, auto loans, personal loans, and credit cards. LendingTree provides a convenient 'one-stop-shop' for your loan needs by giving you choice, convenience and value while helping you find the lender or REALTOR® that's perfect for you.

LendingTree helps you get competing loan offers in one of two ways. First, there is the traditional LendingTree Network where you can get matched with up to four lenders who compete for your business. Second, there is the LendingTree Loans process. See the FAQ below for more information on the LendingTree Loans process.

Am I obligated to accept an offer?
You are under no obligation to accept a loan offer that is presented to you. However, if you do accept a loan offer, you may be obligated to pay a fee to the lender (including LendingTree Loans or Home Loan Center) to begin the processing of your loan application should you choose to apply for a loan with that lender. See the FAQ on HomeLoanCenter.com for more information on LendingTree Loans and Home Loan Center.
What types of business financing do lenders provide?
There are four main types of business loans. Long-term loans are often used to expand a business, acquire a business, refinance a business or provide working capital. Short-term loans don’t have monthly payments – they are due in full at the end of their terms. They’re used to purchase inventory, pay bills or complete quick projects. They work especially well for seasonal businesses. Lines of credit allow small businesses to access funds easily on the fly, much like using a credit card. Alternative financing options include cash advances, leasebacks, peer-to-peer loans, asset-based loans and crowdfunding resources. These can be used for anything, but amounts are typically much smaller than bank loans and rates are often higher.
How will LendingTree get competing offers?

LendingTree, LLC arranges for multiple loan offers through its network of Lenders.

On the LendingTree network, Lenders provide to us criteria about the type of loan (for example, loan amount, whether purchase, refinance, or equity loan) and the type of loan customer (for example, state of residence or creditworthiness) in which the Lender is interested. LendingTree, LLC will provide your information to up to five Lenders whose criteria match your profile. If fewer than five Lenders match your profile, you will receive offers from fewer than five Lenders.

Are there any risks associated with applying for a business loan?
There is no risk or cost to apply and our network of lenders service a wide variety of business loan needs. They tend to focus more on the health of your business and its robust performance than your own personal credit score. This can be a big bonus for some people.