Small Business Loans and What It Takes To Get Approved

There are a variety of factors that go into a lender's loan decision process. Some are inside of your control, like your revenue and credit score, while others sit outside it. Successful loan applicants understand both.

I've spent my career helping small to midsize business owners secure the best small business loans. Below, I'll go over some best practices for strengthening your loan application. We'll get into what lenders look at, the current state of small business lending, and how to put together a solid application.

What Lenders Consider

Eligibility requirements vary from lender to lender, but there are a few things nearly all of them consider.

Where Small Business Lending Stands Right Now

The lending environment shapes your chances of approval just as much as your personal finances. I tell my clients to get a good sense of their local market landscape before submitting an application.

First, you'll want to take a look at the prime rate. This is a good baseline for borrowing and gives you a sense of how low annual percentage rates (APRs) go right now. Timing your application when the prime rate is lower could help secure you better loan terms. The current prime rate is 6.75%.

Depending on where you plan to apply (traditional banks, SBA lenders, or alternative lenders), you'll also want to get a sense of the typical small business loan amount. U.S. Small Business Administration (SBA) loans are some of the more competitive options available for borrowers. Through Clarify Capital's lender network, rates for SBA 7(a) loans start as low as prime.

Here's what the typical loan amount looks like right now:

Applying for the right amount of financing helps to improve your odds. But most applicants don't receive the full amount of financing they apply for. According to the Federal Reserve's Small Business Credit Survey, just 42% of applicants received the full amount, 36% received some or most, and 22% received none.

Understanding how all of these factors play together will give you a better idea of the market and what you can realistically get approved for.

Preparing Your Application

Where and when you apply also affects your odds of approval. Borrowers most often seek small business loans, business lines of credit, and merchant cash advances from a large bank, an online lender, or a small bank.

The application is usually the easy part. What takes longer is gathering all of your documents, like bank statements and tax returns, and then sitting through the underwriting process.

If you're looking for fast funding, the best way to speed up the approval process is to prepare in advance. Here's what you need to organize:

Bank statements

Lenders use these to confirm steady cash flow.

Business tax returns

They'll want to see up-to-date filings that back up your annual revenue.

Photo ID

A valid driver's license or passport for each owner.

Basic business details

Your loan application should include your time in business, industry, and monthly revenue.

Business bank account information

You can usually provide a voided check or login information.

Use of funds

A business plan or a short explanation of how you plan to use the money.

Decision timing depends on whether you go with a traditional financial institution, like a bank or credit union, or an alternative lender. Online lenders tend to approve much more quickly than traditional lenders, with some financing landing as soon as same day.

How To Strengthen Your Approval Odds

There are a few things that can improve your chances of a yes. Here's what I typically recommend:

There's also the standard advice: improve your credit score, pay down your debt, and focus on growing your revenue. All of these things will help increase your chances of fast funding.

Getting Started With a Small Business Loan

Applying for a small business loan through Clarify Capital's lender network takes just two minutes. Clarify Capital has arranged more than $1 billion in financing for our clients.

When you're ready to see what you qualify for, apply today. Checking your options won't affect your credit score.

Frequently Asked Questions on Getting a Small Business Loan

Still have questions about the application process? Here are answers to the most common ones.