How Hard Is It to Get a Business Loan?

If you’re ready to grow your business, getting a business or commercial loan could be a great plan. Now the big question is, how hard is it to get a business loan? Business loans are one of the most important key ingredients for starting and maintaining a business. Many businesses, large or small, rely on business loans to fund their business and to weather the days when cash flow is tight.

There’s no one-size-fits-all answer to getting approved for a business loan, but understanding what factors impact business approvals may help you get funded.

Business Revenue

When you apply for a business loan, lenders are eager to see your proof of revenue or your projected earnings. Most lenders will ask for monthly revenues for the last three to six months. Others may ask for copies of business tax returns and/or financial statements.

Lenders not only verify whether your company is capable of staying in business but also the ability to make the required monthly loan payment.

Longevity

Demonstrating that you have a stable and consistent profit over time is important for lenders. The longer you’ve been in business, the better your chances of getting funded. Businesses that are less than a year old might require a down payment or receive a higher interest rate.

Loan Amount

Lenders will calculate your requested loan amount based on your revenue and cash flow. If your business is less than a year old, has little profit and doesn’t have an ideal business credit score, you may be approved for a smaller amount than what you initially requested.

When you apply for a business loan, always be mindful of your current and projected revenue. Be realistic about the loan amount you request especially if your business is seasonal or has inconsistent earnings.

Credit History

Lenders also take into account your personal credit score for business loans. A strong and solid credit score, personal and/or business, can help boost your chances of getting a business loan approval with better loan terms.

How hard it is to get a business loan will be determined by how capable your business is to repay the loan. Most lenders will require you to have a strong personal and business credit score, consistent revenue and at least two years of business history. If declined, there are other small business loans or SBA loans to consider.

Asset Based Loan vs Cash Flow Based Loan

Your lender will review your loan request based on one of two different types of cash flows. An Asset Based Lender looks at the value of the asset being financed. For example, if they need to repossess a piece of equipment, can they resell it and payoff the loan. While a Cash Flow Based Lender will review the cash flow available to repay the loan and determine if it is adequate to make the payments. Knowing which type of lender you are dealing with could make a significant difference on your financing.

Get Started with Your Business Loan

Clark County Credit Union provides SBA 504 Loans for businesses that are looking to expand and grow their business. The 504 loans can be used for a range of assets that promote business growth and job creation. Call our commercial team today at 702-228-2228 to learn more information about business loans including 504 loans or simply visit our commercial loan page – CCCU Commercial Loans.