Securing a business loan can be a challenge, but certain requirements can make it easier to get approved. As seasoned experts in the business loans industry with years of experience working with lenders, we have discovered three key factors that can increase your chances of getting approval on a business loan.

In this blog, we'll explore these three critical requirements that can enhance your chances of securing a business loan with Simple Capital: an annual revenue of $200k or more, a credit score of 640 or higher, and at least one year in business.

Why These Requirements Matter

Lenders want to ensure that your business has the ability to repay the loan within the agreed terms. Therefore, certain factors about your company serve as indicators of your ability to meet these obligations. Lenders consider these factors as a form of guarantee that you will pay them back.

1. 1. Annual Revenue of $200k+

Making at least $200k in annual revenue gives you a significant advantage when it comes to qualifying for a business loan. Annual revenue refers to the total income earned before expenses. Lenders use this figure to gauge your business's financial stability and its capacity to generate enough income to repay the loan.

A higher annual revenue demonstrates that your business is capable of covering its expenses, including loan repayments. This reduces the risk for lenders and increases your chances of loan approval.

Moreover, a higher annual revenue can also qualify you for larger loan amounts and more favorable terms, such as lower interest rates and longer repayment periods. By showing that your business has a steady stream of revenue, you are indicating to lenders that you are a low-risk borrower and can repay the loan on time.

2. 2. Credit Score of 640+

   
   

Your credit score is another critical factor that lenders consider when evaluating loan applications. It reflects your creditworthiness and financial history, which lenders use to assess the risk of lending to you.

A poor credit score indicates that you have not demonstrated the ability to repay your debts, making it difficult to secure low interest rates and favorable terms. Conversely, an excellent credit score indicates a history of timely debt repayment, making it much easier to qualify for better loan terms.

A credit score of 640 or higher is generally considered good for a small business loan. However, this requirement can vary depending on the lender and the type of loan you are applying for.

Note: A poor credit score doesn't necessarily prevent you from getting the funding you need; it just makes it harder to secure favorable interest rates and terms. We'll discuss ways to improve your credit score below.

3. 3. 1+ Years in Business

   
   

Having at least one year of business operations is a key factor in determining your eligibility for a business loan. Lenders view businesses that have been operational for a year or more as having a proven track record of stability and income generation.

Being in business for at least a year demonstrates to lenders that you have had the opportunity to establish your business, build a customer base, and generate revenue. This gives lenders more confidence in your ability to repay the loan, as you have already shown that your business has the potential to succeed.

Moreover, being in business for a year or more allows you to build your business credit score, which can further improve your chances of loan approval with favorable terms and rates.

How These Requirements Affect Loan Options and Terms

Meeting these requirements can expand your range of loan options and improve your loan terms. For instance, meeting the $200k annual revenue requirement may qualify you for larger loan amounts and longer repayment periods.

Meeting the credit score requirement can make you eligible for lower interest rates and more favorable loan terms. If you meet the one-year-in-business requirement, you may have access to more loan options and better rates than newer businesses.

Conversely, failing to meet these requirements can limit your loan options and result in higher interest rates and less favorable terms. For example, if your revenue is below $200k, you may only qualify for smaller loan amounts with shorter repayment terms.

If your credit score is below 640, you may be considered a higher risk borrower and may be offered higher interest rates and stricter loan terms. And if your business is less than a year old, you may have fewer loan options available and may be subject to higher rates and stricter loan requirements.

What You Can Do to Meet These Requirements

If you don't currently meet these requirements, there are steps you can take to improve your chances of getting a business loan with Simple Capital. Here are some tips:

Increase your revenue: Focus on growing your customer base and increasing sales to generate more than $200k in annual revenue. Consider marketing strategies, expanding your product or service offerings, or targeting new markets. Improve your credit score: Work on improving your credit by paying bills on time, paying down debt, and avoiding new credit inquiries. You can also consider getting a secured credit card or becoming an authorized user on someone else's credit card to build your credit history. Build a track record of success: Focus on building a solid track record of success by maintaining positive cash flow, developing a strong business plan, and building relationships with vendors and customers.

Conclusion

Meeting certain business requirements, such as having an annual revenue of at least $200k, a credit score of 640 or above, and at least one year in business, can significantly increase your chances of getting approved for a business loan. Lenders use these requirements to assess your financial stability, creditworthiness, and business viability. By meeting these standards, you demonstrate that you have the ability to generate sufficient income to repay the loan and are a responsible borrower.

While other factors are also considered by lenders, meeting these requirements can bring you closer to securing the funding you need for your business. Remember that each lender has its own set of requirements, so it's essential to research and compare options to find the best loan for your needs.

Simple Capital makes it easy to find the perfect loan. Our straightforward, 3-minute application considers your annual revenue, credit score, and time in business, as well as your funding needs, to get you the best loan offers. Plus, our application process allows you to add your bank statements as proof of income and demonstrate a good credit score without impacting your credit.