For all small business owners running their businesses, have had a moment where you realized that extra funding can help you make a great change in your business, whether it is upgrading equipment, hiring staff, or simply keeping cash flow steady during a slow season. That’s where a small business loan comes in. But before lenders say “yes,” they look at a few key factors to see if you qualify.
At Merchant Banking Resources, we help entrepreneurs every day secure small business funding that fits their needs.
Let’s break down what really makes you eligible for a small business loan and how you can boost your chances of getting approved.
Eligible For A Small Business Loan:
1. Credit Score and History
For any borrower, it is important to maintain a good credit score as it is a key point where every lender looks first. A good credit score shows the financial responsibility of a borrower and lowers the lender’s risk. While many banks require a credit score of 680+, you can opt for alternatives like Merchant Banking Resources that provide flexible funding solutions even if you have a bad credit score.
Tip: Regularly check your credit report, pay bills on time, and reduce outstanding debt to strengthen your score.
2. Business Age and Stability
Many lenders often want to see whether your business has been running for at least 6-12months or not, as an established business shows consistency and reliability, which helps make lenders trust them and increases the chances of getting a loan approved.
Pro Tip: Even if your business is new, Merchant Banking Resources offers small business funding options tailored for startups and early-stage companies.
3. Revenue and Cash Flow
Lenders want reassurance that you can repay your loan. Strong monthly revenue and positive cash flow make you a more attractive candidate for financing.
Example: If your business generates $15,000/month in sales, a lender is more likely to approve a loan because it shows your ability to cover monthly payments.
4. Business Plan and Purpose of Loan
A clear, realistic business plan helps lenders understand how you intend to use the loan. Whether it’s for marketing, payroll, inventory, or expansion, showing a strategy increases credibility.
At Merchant Banking Resources, we guide you through this step to make sure your small business loan application highlights your goals effectively.
5. Collateral or Assets (Sometimes Optional)
Traditional banks often require collateral like property, equipment, or inventory to secure a loan. However, many small business funding programs today, including those we offer, provide unsecured loans, meaning you don’t always need collateral.
6. Industry and Market Trends
Lenders consider the type of industry your business operates in. Stable or growing industries are generally seen as safer bets. Even if your industry is high-risk, alternative lenders like Merchant Banking Resources have funding solutions designed to support you.
Final Thoughts
Whether you are eligible for small business loans or not depends on various factors like credit score, business history, revenue, and how you are going to use the funds. The good news? You don’t have to figure it out alone.
At Merchant Banking Resources, we make small business funding simple, fast, and accessible for businesses of all sizes. Whether you’re looking to grow, stabilize, or launch your next big idea, we’re here to help you secure the right financing.
FAQs:
Does the age of my business matter?
Absolutely. While most lenders look for at least 12 months in business to prove stability and reduce risk, Merchant Banking Resources focuses on your business potential—helping you access the funding you need to achieve your goals.
What if I have bad personal credit?
That’s not necessarily a deal-breaker. Approval focuses more on your business’s cash flow and current performance, rather than just your personal or credit score alone.
Can I use equipment as collateral?
Yes, equipment financing is a strong option. Since the equipment serves as collateral, lenders are more flexible, especially when business credit is less than ideal.
Are personal and business credit scores both examined?
Lenders usually focus on your business’s cash flow to assess repayment ability, while traditional banks also review credit scores and may require a personal guarantee.
What industries are typically funded?
At Merchant Banking Resources, we offer funding solutions to a wide range of industries, from retail and automotive to healthcare, logistics, contractors, and more.
Is collateral always necessary?
Not always. While equipment loans use collateral, working capital financing may rely more on cash flow and business history rather than tangible assets.
How can I strengthen my application if my credit is weak?
Focus on showcasing strong and consistent cash flow, offer collateral where possible, and ensure your documents are organized and accurate—this builds lender confidence.
Is it worth applying through specialized alternative lenders?
Definitely. If your credit or history isn’t pristine, alternative lenders—like Merchant Banking Resources—offer flexibility that traditional banks or funding companies may not.
Do lenders prefer certain industries over others?
Yes, some industries are viewed as higher risk (like hospitality or beauty services), while government-backed loans often exclude sectors such as real estate investment, gambling, or lobbying.
How do credit scores impact eligibility?
For traditional bank or SBA loans, you typically need a personal score of 690+, and a healthy business credit score helps too. Online lenders may be more flexible, focusing on your business performance.