October 07, 2021
What You Should Know About Business Loan Approval Rates
While a business loan may benefit your business, there’s no guarantee you’ll get approved for one. Your financial situation and business history as well as the lender and type of loan you choose will determine if you’ll get approved. Here’s what you should know about business loan approval rates.
Current Business Loan Approval Rates
As the economy begins to recover from the affects of the COVID-19 pandemic, there has been an increase in business loan approval rates. Compared to last year, major banks, community banks, online lenders, and alternative lenders are approving more loan applicants. This is great news if you require a small business loan in the near future. If your finances aren’t in the best shape, however, your chances of approval may still be low. Therefore, you may want to improve your business's financial situation before you apply for funding.5 Factors That Business Financing Lenders Consider
Every working capital lender is unique, but there are certain factors that most lenders look at when they consider an applicant for a small business loan. Typically, in order to qualify for a loan, you'll be required to meet the following requirements:1. Time in Business
Most business lenders want to see that you’ve been in business for at least two years. Usually, companies that have been in business for a longer period of time are more likely to responsibly manage their finances. Therefore, it might be difficult to get approved if you own a startup or new business without a proven track record.2. Credit Score
The higher your personal and business credit score is, the better. A high credit score signifies that you’re a responsible borrower and more likely to repay your loan. Although there are lenders that don't require credit checks, you should still review your credit history prior to applying.3. Business Plan
A business plan is a written document that outlines your short and long term business goals and how you plan to achieve them. It includes information on your products and services, marketing strategy, financial plan, and budget. If you have a detailed business plan, this can help improve your chances of loan approval, because the lender will gain a better understanding of your financial plans.4. Business Finances
Business loan lenders will likely take a close look at how your business is doing financially. When they review your loan application, they'll also review your working capital, debts, profits, and revenue.5. Experience
If you’re a startup or new business, lenders prefer that you have experience in the type of business you plan to run. In the event you don’t have significant experience, they’ll expect you to hire those who do.
How to Get Approved for a Business Loan
Fortunately, there are several strategies that can increase your chances of small business loan approval. They’re important, even when business loan approvals are high.1. Understand the Requirements
Before you start the business loan application process, make sure you know what the business lender requires. Most lenders state their minimum qualifications and requirements on their website. If you can’t find this information online, don’t hesitate to call or email the financing lender.2. Gather Required Loan Documents
Banks and traditional lenders will likely ask you to submit a variety of legal and financial documents, such as:- Personal and business tax returns
- Balance sheets
- Income statements
- Business licenses
- Articles of incorporation
- Financial projections if you own a newer business.