Why These Requirements Matter

Lenders want to make sure your business has the ability to pay back the loan within the terms. Therefore, certain factors about your company are indicators of your ability to not default on the loan. Lenders consider these factors almost like a guarantee that you will repay them.

1. Annual Revenue of $200k+

Making at least $200k in annual revenue gives you an advantage in qualifying for a business loan. Keep in mind that annual revenue is the total money earned before expenses. Lenders use your annual revenue to indicate your business’s financial stability and ability to generate enough income to repay the loan.

A higher annual revenue shows that your business generates enough income to cover its expenses, including loan repayments. This reduces the risk for lenders and increases your chances of being approved for a loan.

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

2. Credit Score of 640+

The credit score requirement is another important factor that lenders consider when evaluating loan applications. Your credit score reflects your creditworthiness and financial history, and lenders use it to assess your lending risk.

A poor credit score indicates you have not proven your ability to pay back your debt and will make it harder to get approval for low-interest rates and longer terms. However, an excellent credit score means you have a reputation for paying back your debts in a timely manner and makes it much easier to lend.

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

Note: A poor credit score doesn’t have to stop you from getting the funding you need; it just may make it difficult to get the interest rates and terms you want. Below we discuss some ways to increase your credit score.

3. 1+ Years in Business

Having at least 1 year in business is crucial in determining your eligibility for any business loan. This is because lenders view businesses that have been operational for a year or more as having a proven track record of stability and the ability to generate income.

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

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

How These Requirements Affect Loan Options and Terms

Meeting these requirements can open up a more comprehensive range of loan options and better loan terms. For example, if you meet the $200k annual revenue requirement, you may qualify for more significant loan amounts and longer repayment terms.

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

On the other hand, failing to meet these requirements can limit your loan options and result in higher interest rates and less favorable loan 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