Like most good things, small business loans don’t come handily. Compared to personal loans, they entail a higher risk for the lenders, resulting in more stringent eligibility requirements. With many businesses wanting to get a business loan, they may be uncertain whether they qualify for it.
If you are one of these enterprising owners looking to get an SBA loan, don’t fret! Here’s everything you need to know about the requirements for an SBA loan:
Lenders are keen on looking at both personal and business credit history. However, since many small-business owners don’t have business credit, your personal credit score becomes more significant. Typically, you will need a credit score of at least 600 to qualify for an SBA loan.
- Cash Flow and Income
Cash flow is a representation of the status of your business, and it can make or break your application. Remember, lenders like to see that you have a healthy and steady stream of cash to ensure that you are capable of sustaining your loan payments. Moreover, lenders may also scrutinize your business expenses to know how profitable it is.
- Business Age
Unfortunately, around 20% of businesses go under within their initial year. It’s not surprising that most lenders and banks require a minimum business age for their borrowers.
For most loans, businesses must be from six months to two years old. However, be reminded that lenders don’t take into account how long the company has been registered with the government but instead on how long its bank accounts have been open.
The kind of industry where your business falls can significantly affect the decision making for most lenders. Keep in mind that many lenders steer away from specific industries that are risky. Businesses considered to be socially unappealing or those that are seasonal and don’t have a steady cash flow are more likely to be rejected.
After getting approved for a business loan, it would be up to you to use it responsibly and reap the benefits it can give to your business. However, we understand that any business is a risk. So, whether things go your way or the other, don’t worry as you can always consult a Tampa business broker to help to achieve that win-win situation.
in so that the business can be sold fast. No investor would put money into something that has no future.