Qualifying for Loans During COVID
Through the course of 2020, COVID has practically changed everything about how business operates, including the qualifications for business loans for your small business. If you know what to expect when applying for a loan, your likelihood of getting funded increases exponentially. To provide you with a better understanding of what to expect, we have consolidated the qualification criteria that lenders are looking at when giving out a loan to a small business. Obviously, loan qualifications are determined by the lenders, case-by-case, but this should give you a better understanding of what is going on in the lenders’ heads.
Equipment Financing
These loans are designed to help pay for all of your capital expenditures on hard assets such as office equipment, medical equipment, trucks, construction equipment, or even repairs. Since this type of loan is collateralized by the equipment that you are buying or repairing, these loans tend to be easier to obtain. Additionally, since equipment loans are secured, they typically don’t have a minimum revenue requirement.
Qualifications:
Time in business: Some lenders fund startups, others require some extended time in business
Documents Provided:
Credit Application
3 months of bank statements
Equipment Invoice
Business Term Loan
These loans are fixed payments over a set term, creating a very predictable monthly expense, getting you the funding you need to grow in tough times such as these.
Qualifications:
Time in business: 2 or more years
Monthly Revenue: $8,300 or more
Credit Score: 680 or more
Documents Provided:
6 months of bank statements
2 years of business tax returns
2 years of personal tax returns
YTD Profit/Loss Report
Debt Schedule
ACH Loan
An ACH loan, also referred to as a “Cash flow loan,” is the optimal solution for when your business is experiencing issues in cash flows. This type of loan is quick to fund, typically within 24 hours of approval by the lender.
Qualifications:
Time in Business: 6 months or more
Monthly Revenue: $10K or more
Credit score: 500 or more
Documents Provided:
3 months of bank statements (may also need YTD)
Accounts Receivable Financing
Accounts Receivable funding is typical for if you are experiencing troubles in working capital between the time of the invoice and the time of the receipt of payment.
Qualifications:
Time in business: 6 or more
Monthly Revenue: $10K or more
Credit Score: 550 or more
Documents Provided:
Accounts Receivable Aging Report
Accounts Payable Aging Report
3 months of bank statements
Sample Invoice
Business line of Credit
This is the most flexible type of business loan, primarily for small businesses. There are no restrictions on how the funds are used within your business. Over the term of the loan, you are able to borrow as much as you need, up to a limit, as frequently as you need it.
Qualifications:
Time in business: 2 years or more
Monthly Revenue: $15K or more
Credit Score: 650 or more
Documents Provided:
3 months of bank statements (may also need YTD)
SBA 7(a) Loan
SBA loans are a favorite amongst small businesses because of their low interest rates and long terms. SBA 7(a) loans provide low cost of capital financing, but have increased paperwork, larger competition, and longer waiting periods.
Qualifications:
Time in Business: 2 years or more
Monthly Revenue: $20K or more
Credit Score: 680 or more
Documents Provided:
6 months of bank statements
2019 Tax Return or Profit/Loss Report
2019 Personal Tax Return
Debt Schedule
Comparing Loans:
Typically, there are 2 way to approach applying for business loans: 1) You can make a long list of lenders who provide the type of loan you are looking for, researching them all independently, or 2) go through a brokerage firm, who has access to a multitude of lenders and has the industry experience to get you the best rates and terms that you are looking for.
If you are ready to start looking for lenders to provide one of these loans for your business, fill out our simple credit application to start on your way to growing your business.
