Is It Hard to Get a Business Loan?

Learn all the factors that determine how hard it will be to get that small business loan.
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How Hard is it to Get a Business Loan?

How hard it is to get a business loan will depend on specific factors a wide variety of factors.

For one, your own business credentials will determine how hard it is to get a small business loan. If you have less time in business, challenged credit, or low annual revenue, you’ll find it’s pretty hard to get a business loan that’s affordable. On the other hand, if you’re an established business owner with strong financials—like a long business history, good credit, and high annual revenue—getting a business loan won’t be so hard for you.

How hard it is to get a business loan will also depend majorly on what kind of business loan you apply for. The hardest business loans to get—both based on underwriting standards and the time and energy you’ll have to put into the application—are SBA loans and traditional bank loans. Meanwhile, the easiest business loan to get is a merchant cash advance, offering very fast, accessible (but expensive) capital.

In this guide, we walk through exactly how hard it is to get a business loan based on your unique business needs and credentials.

Why Getting a Business Loan Can be Hard

For starters, let’s address the big, overarching question— how hard is it to get a small business loan?

Unfortunately, there’s no definitive, tidy answer to this question. How hard it is to get a small business loan will always rely on the situation you find yourself in when you’re applying for the business loan.

How is your business doing? What does your business need funding for? What industry is your business in? How much are you willing to pay for funding?

These are only a small fraction of the circumstances that will affect how difficult or easy it will be for your business to access funding. Again, there is not definitive list of factors that will affect how easy it will be for your business to secure funding. However, there is a list of pretty frequent factors that will come into play when your business applies for a loan.


The Different Types of Business Loans, Ranked by Accessibility

Ready to look into how easy each type of business loan is to qualify for?

Here are the different types of business loans, ranked by general accessibility, starting with the easiest type of business loan to qualify for.

Merchant Cash Advances

First up on our list is the easiest type of business loan to qualify for—the merchant cash advance.

This small business funding option is actually technically not a loan—it’s an advance. With a merchant cash advance, a lender will advance your business’s future credit card revenues that you will repay in a predetermined daily percentage of your business’s credit card revenues.

Because it is the most accessible of your business funding options, a merchant cash advance will also almost always be the most expensive of all your options. A MCA’s cost is most often expressed as a decimal factor rate which, if multiplied by your loan amount, will show you how expensive your MCA will turn out to be.

All that said, MCA’s are remarkably easy to qualify for—you’ll just need:

  • 5+ months in business
  • a 400+ personal credit score
  • $75,000+ in annual revenue

Their costly rates aside, merchant cash advances are one of the best options for under-qualified businesses who need funding.

How to Apply, By Loan Type

Here’s our breakdown of how to apply for each loan by loan type.

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Invoice Financing

Next up, invoice financing is another relatively accessible business funding option for less-qualified businesses. Invoice financing works by taking an outstanding invoice that a business is waiting on as a form of collateral.

With invoice financing, a lender can advance your business up to 90% of your outstanding invoice’s value. But this advance doesn’t come free—they’ll charge you a certain percentage of interest per week that the invoice is outstanding. So the further away you are from your invoice’s fulfilment day, the more expensive your invoice financing will be.

Next up, invoice financing is another relatively accessible business funding option for less-qualified businesses. Invoice financing works by taking an outstanding invoice that a business is waiting on as a form of collateral.

With invoice financing, a lender can advance your business up to 90% of your outstanding invoice’s value. But this advance doesn’t come free—they’ll charge you a certain percentage of interest per week that the invoice is outstanding. So the further away you are from your invoice’s fulfilment day, the more expensive your invoice financing will be.

That said, because invoice financing is a self-secured form of business funding, it’s relatively easy to qualify for. Invoice financing comes with these general minimum requirements:

  • 6+ months in business
  • $50,000+ in annual revenue

That said, because invoice financing is a self-secured form of business funding, it’s relatively easy to qualify for. Invoice financing comes with these general minimum requirements:

  • 6+ months in business
  • $50,000+ in annual revenue
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Business Lines of Credit

Third on our list, business lines of credit are yet another business funding option that are reasonably accessible for businesses that are traditionally less-qualified.

A business line of credit basically works like an intangible credit card—your business will be extended a line of credit from which it can spend, and it will only have to pay back whatever it ends up spending. However, with business lines of credit, you’ll always be handling cash, whereas credit cards will charge you a lot extra for cash advances.

Plus, business lines of credit will often be easier to access. They come with general minimum requirements that are pretty easy to fulfill:

  • 6+ months in business
  • $50,000+ in annual revenue
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Short-Term Loans

The next most accessible type of business loan is the short-term loan. A short-term loan will function a lot like a condensed version of a traditional term loan—you’ll receive a lump sum of funding that you’ll pay off, plus interest, over time. However, with short-term loans in general, the loan amounts will be smaller, the APR’s will be higher, and the repayment terms will the shorter. Plus, instead of scheduled monthly payments, you’ll likely pay scheduled daily or weekly payments. Some short-term loans even express their rates in factor rate instead of APR’s (which is a tell-tale sign of some pretty expensive funding).

However, short-term loans come with less desirable terms because they’re much more accessible than their longer-term counterparts. You’ll just need to fulfill the following minimum requirements for short-term loan:

  • 1+ years in business
  • a 550+ personal credit score
  • $50,000+ in annual revenue
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Equipment Financing

Next, the fifth most accessible type of business funding is equipment financing. Just like invoice financing, equipment financing is a form of self-secured form of business funding.

How does it work, exactly?

Well, equipment financing is a form of business loan used for acquiring equipment. If you qualify for equipment financing, you’ll be able to finance up to 100% of a piece of equipment’s value.

The equipment itself functions as collateral for the loan, and thus makes equipment financing less risky for the lender and more affordable for the borrower. However, because equipment financing offers such ideal terms, its minimum requirements present a bit of a hurdle. You’ll first need to make sure that you fulfill the following minimum requirements for equipment financing:

  • 11+ months in business
  • 600+ personal credit score
  • $100,000+ in annual revenue
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Term Loans

Term loans are the second-to-last and second least accessible type of business loan on our list.

When you picture a business loan, you’re probably picturing a term loan—a lump sum that you receive and pay off, plus interest, with scheduled monthly payments. Term loans offer a straightforward, affordable funding solution for small businesses.

Unfortunately, these ideal terms might be difficult for some small businesses to qualify for. You’ll have to first fulfill the following minimum requirements to even be considered for a term loan:

  • 1+ years in business
  • a 600+ personal credit score
  • $90,000+ in annual revenue
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SBA Loans

Last but certainly not least, SBA loans are the final, least accessible business loan option on our list.

SBA loans are the cream of the crop of small business loans—because the Small Business Administration partially guarantees SBA loans, lenders are willing to lend to small businesses more often and with better terms.

However, because they come with such ideal terms, SBA loans will stillbe the hardest type of business loan to qualify for, despite the partial SBA guarantee that makes it less risky for lenders. SBA loans come with the following minimum requirements that might stop some business owners in their tracks:

  • 2+ years in business
  • a 640+ personal credit score
  • $100,000+ in annual revenue

The Factors at Play For Your Loan Application

What Matters in Your Application

Though things are always shifting within the ever-growing and innovating industry that is small business lending, there are some consistencies in exactly which factors will affect how hard it will be for your business to get a business loan.

Let’s take a look at the three main factors that will play a huge role in how easy getting a business loan will be.

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Your Personal Credit Score

Though it might seem counterintuitive and maybe even unfair, your personalcredit score will be one of the three biggest determining factors for how easily your business will be able to secure a loan.

From a lender’s perspective, at the end of the day, you as the business owner will be in charge of spending and paying back any of the funds you secure through a business loan. As such, they look to your own financial history as an indication of how you handle your finances.

And what do lenders look to in order to get an idea of your financial history? You guessed it—your personal credit history.

Because of this, many lenders will establish a minimum personal credit score that they’re willing to work with, so be sure to make sure you fulfill this minimum before you dive into the application process.

Generally speaking, if your personal credit score rounds in somewhere in the high 600’s, then you should fulfill almost any lender’s minimum FICO score requirement. However, checking in before you start your will only cost you a quick Internet search, so it’s worth it to double check if you’re in range.

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Your Business’s Age

The next of the top 3 factors that will determine how hard it will be for your business to get a loan is your business’s age.

When you consider that only 20% of businesses with employees will survive their first year in business, it goes without saying that younger businesses are riskier to lend to.

As such, lenders will look to your business’s age as an indicator of your business’s likelihood to stay in business and, by extension, your business’s ability to pay back the loan it’s applying for.

Just like with your personal credit score, with your business’s age, many lenders will establish a minimum requirement. Again, you should ensure you fulfill a lender’s minimum business age before sinking time into applying for funding from them. Generally speaking, if your business has over 2 years of business history, then you should be good to go. However, we suggest that you always dedicate a minute or two to ensure that you fulfill the minimum business age no matter how much business history you have under your belt.

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Your Business’s Revenue

Your business’s revenue is the last of the big 3 qualifications that will determine how hard it will be for your business to qualify for a loan.

Just like your personal credit and your business’s age, your business’s revenue will be a big indicator of how likely your business will be to pay off the loan that it’s asking for. As such, it will be another big factor that underwriters will consider when deciding whether or not to approve your loan application.

Your business’s revenue will show a potential lender how much money your business is taking in within a given time. And though different lenders will ask for your business’s revenue within different spans of time—sometimes a monthly revenue, but more often an annual revenue, they’ll always want an idea of how much business you’re doing.

Just as lenders will establish minimum personal credit scores and business ages they’re willing to work with, they’ll also establish a minimum revenue they’re willing to work with. So, just as we suggested in the above sections, we urge you to check in with a lender’s minimum revenue requirements before you sink your valuable time and energy into applying for funding from them.

Check My Options

How Involved is the Business Loan Application Process?

The next way to go about answering the question “how hard is it to get a business loan?” is to consider how involved the business loan application process is. Again, the answer to this question will vary based on situational details.

However, by and large, certain types of business loans will require more of your time and effort to apply for than others will. So, if you’re wondering to yourself, “How hard is it to get a small business loan?” within the context of the amount of time and energy it will require to apply, it will be helpful to consider each loan type application documents and funding speed.

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Invoice Financing

The type of business loan with the most efficient and straightforward application process is invoice financing. Invoice financing’s purpose is based on optimal timing—you need an invoice’s value now and not whenever your customer plans to fulfill it in the future—invoice financing lenders tend to move quickly. In fact, you can secure invoice financing in as little as 1 day.

As for documentation that you’ll need to apply for invoice financing, you’ll just need to collect the following paperwork:

  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Credit Score
  • Outstanding Invoices
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Short-Term Loans

Another type of business loan with a particularly speedy application process is the short-term loan. Indeed, the name “short-term” doesn’t just apply to this funding option’s repayment term length—it also describes the turnaround on your application. In fact, you’ll be able to get funded with a short-term loan in as little as a single day.

This will, of course, depend on how quickly you gather the necessary paperwork. But, luckily, the paperwork that short-term loan applications require is also pretty minimal. You’ll just need to get the following documents ready for your short-term loan application:

  • Driver’s License
  • Voided Business Check
  • Proof of Ownership
  • Bank Statements
  • Credit Score
  • Personal Tax Returns
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Business Lines of Credit

Another business funding option with a swift application turnaround is the business line of credit. Yet again, if you’re able to move quickly on your end, you can get funded with this business loan type in as little as a day.

However, a business line of credit will require a bit more paperwork, which might slow down your application process. To apply for a business line of credit, you’ll need to gather these documents:

  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Balance Sheet
  • Profit & Loss Statements
  • Credit Score
  • Business Tax Returns
  • Personal Tax Returns
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Equipment Financing

If you’re willing to wait a little longer in order to avoid additional paperwork, then equipment financing might be a good business loan option for you. With a funding speed of as little a 2 days, equipment financing is still a pretty speedy option as far as business loans go.

Plus, you’ll only need to compile the following documents for your application for a business line of credit:

  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Credit Score
  • Business Tax Returns
  • Equipment Quote
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Term Loans

Another business loan option that will fund you in as little as 2 days is the term loan. Though term loans tend to offer pretty long repayment terms, their turnaround on applications can be surprisingly swift.

That said, you’ll still need to compile a good bit of paperwork to apply for a term loan. Take a look at the list, and get ready to get your hands on the following documents if you want to apply for a term loan:

  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Balance Sheet
  • Profit & Loss Statements
  • Credit Score
  • Business Tax Returns
  • Personal Tax Returns
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Merchant Cash Advances

As a surprising twist, you’ll find that, on average, merchant cash advances actually lag a bit when it comes to funding speed. Though they’re the easiest type of business loan to qualify for, merchant cash advances will take longer than a week to fund. That’s because they rely on either verifying or setting up merchant services, which will slow down the funding process.

That said, you won’t have to compile much paperwork in the process. You’ll just need these 6 documents to apply for a merchant cash advance:

  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Credit Score
  • Business Tax Returns
  • Credit Card Processing Statements
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SBA Loans

Last up, again, is the SBA loan. Because SBA loan has such high standards, and because it involve a government entity, its application process will involve a bit of bureaucracy which, as we all know, will gum up the works. As such, an SBA loan will take at least 3 weeks to process and fund.

Plus, you’ll need to gather a pretty substantial stack of paperwork. The following documents are necessary for an SBA loan application:

  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Balance Sheet
  • Profit & Loss Statements
  • Business Tax Returns
  • Personal Tax Returns
  • Business Plan
  • Business Debt Schedule: At the very least, 3 weeks

The Bottom Line for Getting a Business Loan

How Hard is it to Qualify for a Business Loan?

The first way to consider the question of how hard it is to get a business loan is looking into how hard it is to qualify for a business loan.

Still, this question will vary from situation to situation. However, if we take a step back and speak generally, certain types of a business loans are easier to qualify for than others. Many loan types will come with general minimum requirements. To be clear, if you meet a loan type’s general minimum requirements, it simply means that you could qualify for that type of loan, and it doesn’t guarantee that you will qualify for that type of loan.

Is It Hard to Get a Business Loan: Seeing the Pattern

Notice a pattern?

If you’ve got a keen eye for correlation, then you probably noticed that—barring the merchant cash advance, that require an extra step of setting up merchant services—the types of business loans that are easiest to qualify for are the quickest and easiest to apply for.

So, no matter how you meant the question “is it hard to get a business loan?”—whether your were referring to accessibility or application process—the rankings by loan types will be nearly identical. That’s mostly because business loans that are easier to qualify for generally require the lender to verify less information through documentation.

How to Graduate to a Better Loan Product Over Time

Interested in a business loan but only qualify for shorter, expensive loans at the moment? While there are major benefits to short-term loans—such as taking on a smaller financial obligation and providing time to build your borrower reputation—it can be all too easy to want to go after better loans early on.

But with a proven track record of paying back the smaller loan, you’re much more likely to secure a loan upgrade somewhere down the road. Let’s tackle what you can do to graduate to a better loan product over time.

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Steps to Become an Ideal Borrower

If you first qualify for smaller loans, use them as an opportunity to build your “credit” as a borrower—eliminate the risk factors that make lenders shy away from your profile. Here are a few steps you can take to build a stellar borrower reputation:

  • Pay your small loans off on time and establish a solid repayment history and improve your credit score.
  • Maintain a healthy bank balance while you work to pay down the initial loan.
  • Stay in business—obviously.
  • Keep an eye on the terms of your current loan and be careful to not violate them.
  • Send your financial statements before their due date or exactly on time.

Your Next Steps

So, with the question “is it hard to get a business loan?” answered, what’s the next move?

Well, it’s time to think about where your priorities lie.

As you’ve probably gleaned from this article, the types of business loans that are the easiest to get are quite often the most expensive. On the other hand, the types of business loans that are the hardest to get are often worth the effort due to the ideal terms they offer.

Lucky for you, there are tons of resources out there to make your journey towards funding your business a smooth one. And you’re already on the right path by consulting this guide.

The way we see it, the types of business loans that are hard to get, like term loans and SBA loans, are worth the effort it might take to apply or even to improve your business’s credentials in order to qualify.

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