Getting a business loan comes down to choosing the right loan type, preparing your financial documents, and applying with a lender whose requirements match your business profile. The process is straightforward once you understand what lenders look for, but the specifics vary widely depending on whether you go through a bank, the SBA, or an online lender.
What Lenders Want to See
Every lender evaluates three core factors: your creditworthiness, your ability to repay, and how long your business has been operating. Beyond that, the thresholds differ significantly by lender type.
Traditional banks tend to be the most selective. They typically want a personal credit score of 680 or higher, at least two years in business, and strong annual revenue. SBA-backed loans require that your business operates for profit, is located in the U.S., and qualifies as “small” under SBA size standards (which vary by industry). The SBA also requires that you’ve been unable to get comparable financing from other sources on reasonable terms. For certain SBA programs like the Working Capital Pilot, you need at least one year of operating history and the ability to produce accurate financial statements.
Online lenders are the most flexible. Many will work with businesses that have been open for six months or less and with credit scores in the 500s. That flexibility comes at a cost, though: interest rates from online lenders range from 14% to 75% APR, compared to 6.75% to 11% for bank loans and 5.61% to 14.75% for SBA loans, based on data through late 2025.
Types of Business Loans
The right loan depends on what you need the money for and how quickly you need it.
Term loans give you a lump sum that you repay in fixed installments over a set period, usually one to ten years. These work well for one-time investments like buying equipment, renovating a space, or funding expansion. Banks and online lenders both offer term loans, with banks offering lower rates and online lenders offering faster approval.
SBA 7(a) loans are issued by private lenders but partially guaranteed by the federal government, which reduces the lender’s risk and typically results in lower rates and longer repayment terms for borrowers. They can be used for working capital, equipment, real estate, or refinancing existing debt. The tradeoff is a longer, more paperwork-heavy application process.
Business lines of credit work like a credit card: you’re approved for a maximum amount and draw from it as needed, paying interest only on what you use. This is ideal for managing cash flow gaps, covering seasonal dips, or handling unexpected expenses. Once you repay what you’ve drawn, the funds become available again.
Equipment financing is specifically for purchasing machinery, vehicles, or other business equipment. The equipment itself serves as collateral, which often means easier qualification and lower rates than unsecured options.
Documents You’ll Need
Lenders will ask for both personal and business financial records. Gathering these before you apply speeds up the process considerably. Here’s what most lenders require:
- Tax returns: Personal and business returns from the most recent three years.
- Bank statements: Up to one year of business bank account statements showing your cash flow patterns.
- Financial statements: Your most recent balance sheet, income statement (also called a profit and loss statement), and cash flow statement. Some lenders also want projected versions of these.
- Debt schedule: A list of all current business debts, including amounts owed and payment terms.
- Accounts receivable: A list of outstanding invoices owed to your business.
- Legal documents: Articles of incorporation, your operating agreement (for LLCs), your Employer Identification Number (EIN), and any relevant business licenses or permits.
- Lease agreement: Your commercial lease, if you operate outside your home.
- Third-party contracts: Any significant contracts between your business and customers, vendors, or partners.
If you have a franchise, expect to provide your franchise agreement as well. SBA loans require additional forms specific to the program, which your lender will walk you through.
Collateral and Personal Guarantees
Many business loans require collateral, which is an asset the lender can seize if you default. Common forms of collateral include real estate, equipment, and inventory. Offering collateral typically gets you a lower interest rate because it reduces the lender’s risk.
Even on loans marketed as “unsecured” (meaning no specific asset is pledged), most lenders still require a personal guarantee. This is your promise to repay the debt from your own assets if the business can’t. It means your personal savings, home equity, or other property could be at stake. Some alternative lenders offer revenue-based financing with no personal guarantee, but these are usually limited to businesses that meet specific annual revenue thresholds and have been operating for a certain period.
The Application Process Step by Step
Start by determining how much you need and what you’ll use it for. Lenders will ask, and a clear answer signals that you’ve thought through the investment. A vague request for “some extra cash” raises red flags.
Next, check your credit. Pull both your personal credit report and your business credit report if one exists. If your personal score is below 680, you’re unlikely to qualify at a bank, but online lenders and certain SBA lenders may still work with you. Correcting errors on your credit report before applying can make a real difference.
Then, shop around. Get quotes from at least three lenders. Compare not just the interest rate but also the APR (which includes fees), repayment terms, and any prepayment penalties. A loan with a lower rate but higher origination fees might cost more overall.
Once you’ve chosen a lender, submit your application along with the required documents. Bank and SBA loans can take anywhere from a few weeks to a few months to close. Online lenders often fund within days, sometimes within 24 hours. During the review period, the lender may request additional documentation or ask questions about your financials. Respond quickly to avoid delays.
How to Strengthen Your Application
Your chances improve significantly if you can demonstrate consistent revenue and clean books. Lenders care less about having massive revenue than about seeing a stable, predictable income stream that covers the loan payments with room to spare. Before applying, organize your bookkeeping so your financial statements are accurate and up to date.
Reducing existing debt helps too. Lenders look at your debt service coverage ratio, which is simply how much income your business generates compared to how much it already owes in debt payments. If your business earns $10,000 a month and already pays $8,000 in debt obligations, a new loan payment looks risky. Paying down existing balances before applying improves this ratio.
If your business is newer or your credit is weaker, consider starting with a smaller loan amount. A modest line of credit that you use responsibly and repay on time builds a track record with the lender, making it easier to qualify for larger amounts later. Some business owners also bring on a co-signer with stronger credit or offer additional collateral to offset a thinner financial profile.
What Approval Timelines Look Like
The speed of funding depends almost entirely on the lender type. Online lenders move fastest, with some approving applications the same day and depositing funds within one to three business days. Traditional bank loans typically take two to four weeks from application to funding. SBA loans are the slowest, often requiring 30 to 90 days due to the additional government paperwork and underwriting layers involved.
If timing is critical, an online lender or a line of credit from your existing bank (where they already have your financial history) will get money in your hands fastest. If you can plan ahead, the lower rates on bank and SBA loans make the wait worthwhile.