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Every entrepreneur faces this moment: your business needs funding, but getting approved feels like cracking a secret code. With approval rates varying wildly—from 73% for small equipment loans to just 32% for Small Business Administration (SBA) loans—understanding what lenders want can make or break your application.
The truth? How hard it is to get a business loan depends entirely on knowing which factors matter most and choosing the right type of financing for your situation. In this guide, you’ll discover exactly what lenders evaluate, which loans are easiest to qualify for, and how to position your business for approval—so you can secure the funding you need to grow.
Factors that impact business loan approval
Business loan approval factors vary based on the lender, and each has its own eligibility requirements. According to the 2024 FDIC Small Business Lending Survey, larger loans, like those of more than $50,000 or $100,000, require more detailed financial information—such as tax returns and bank statements—than smaller business loans.
Banks use tiered approval processes for traditional small business loans. A single level of approval means the loan is reviewed and decided by just one reviewer, either human or automated. Other processes subject applications to multiple layers of review before approval. Here are the factors that have an impact on business loan approval:
Loan size
The FDIC Small Business Lending Survey finds 80% of banks say loan size is one of the most significant factors in approval odds. Small business loans—$25,000 or less—are more likely to get quickly approved and at a faster rate compared to larger loans. Larger loan applications tend to receive more intensive review because more money is at stake, posing a bigger risk to the lender.
Industry
Some financial institutions limit the industries they lend to. If a lender determines a business is in a riskier industry, such as gambling, multilevel marketing, or real estate investing, it may not grant approval for a small business loan. Businesses in risky or specialized industries may have fewer borrowing options than businesses in more predictable industries.
Time in business
A new business may have a harder time getting business financing. The FDIC survey found that 53% of banks said that a lack of experience in your business industry hurts your chances of small business loan approval. Many lenders require at least two years in business to qualify for an SBA loan, but some may have more flexible criteria.
Revenue
Showing your company is profitable and has solid sales tells lenders you can repay your loan. The FDIC survey found 67% of banks said a company’s insufficient debt service coverage ratio, or cash flow compared to its debt obligations, was an important consideration in loan approval.
Some banks have a high minimum revenue requirement, e.g., at least $250,000 in annual revenue, while others have more flexible qualifications. Although SBA loans don’t have specific revenue requirements, SBA-approved lenders may have their own standards.
Credit history
Both a good personal credit score and good business credit history can boost your loan approval odds, depending on your lender. A poor credit score can hurt your chances of getting a small business loan. Each lender sets minimum credit score requirements. Traditional lenders often look for scores of about 680 (out of 850) or higher, while alternative lenders may consider lower scores.
Collateral
Some lenders are more likely to approve your loan if you put up collateral—whether personal assets or business-related—but that also means your approval time takes longer as your lender evaluates your collateral. For secured loans, the type of collateral you offer can affect both your approval odds.
The FDIC survey says 84% of smaller banks evaluate collateral for small-dollar loans, or loans of $25,000 or less, even if collateral isn’t necessarily required. Small and large banks almost always evaluate your collateral for approval for larger loans.
How hard is it to get each type of loan?
- Auto or equipment loan
- Business line of credit
- Business loan
- Merchant cash advance
- SBA loan or line of credit
The type of loan you want matters—not every business qualifies for every type of business loan. Since each lender has its own eligibility requirements, getting a business loan from one lender might be more difficult than getting one from another. Established companies may qualify for more business or equipment loans, while newer companies may have an easier time getting a business line of credit or SBA loan. Here’s how the process generally works for each:
Auto or equipment loan
An equipment loan finances equipment or vehicles for your business. The equipment typically is the collateral for your small business loan, so if your company can’t repay the debt, the lender can seize the equipment.
Lenders have varying guidelines for auto and equipment loans. Some may require a minimum number of years in business, specific annual revenue, or both. Lenders look at how much debt you have in relation to your cash flow, as well as your personal credit score and business history. But each lender weighs these factors differently, and some may be more lenient with, say, bad credit when you’re using equipment as collateral.
According to Fed Small Business data, more than two-thirds of auto or equipment loan applicants received approval in 2024.
Business line of credit
A business line of credit is a revolving line of credit, similar to a business credit card. Once approved, you get a credit limit that allows you to borrow what you need and pay interest on what you borrow. You can regularly use funds from your business credit line without taking out new loans whenever you need cash.
Applicants for unsecured lines of credit don’t need to put up collateral to get approved, but lenders are more likely to look at the strength of your company—and, thus, your ability to repay your loan—and credit history for approval. Secured lines of credit use company assets as collateral. If you don’t have business assets, you might have to make a personal guarantee—a promise to personally repay the debt if your business can’t—for approval.
Eligibility varies widely by lender and the type of line of credit. Owners of newer companies might need to include personal financial information and business documents—like tax returns, bank statements, and other debt obligations—as part of their application. According to the Fed Small Business data, 47% of business line of credit applicants were approved in 2024, while 28% were partially approved and 24% were denied.
Business loan
A business loan is a lump sum your company borrows and repays through regular installments until it’s fully paid off. Traditional financial institutions like banks and credit unions offer business loans, as do online lenders and other alternative lenders. You can use business loans for different business purposes. For instance, you can cover cash flow, payroll, or rent payments.
Data from Fed Small Business shows that 39% of business loan applicants were approved in 2024, while 30% were partially approved, and another 32% were denied and unable to get a business loan.
Merchant cash advance
A merchant cash advance, or MCA, is a cash loan to cover cash flow, payroll, inventory, or rent. Repayment is generally based on a percentage of future sales (known as revenue-based financing), with lenders taking withdrawals daily, weekly, or monthly based on agreement terms until the advance is fully repaid. In this way, merchant cash advances are different from traditional small business loans, where most lenders require only monthly payments with a fixed or variable interest rate.
Merchant cash advance lenders have different eligibility requirements, but these business loans tend to disburse funds faster, since borrowers need to meet fewer requirements. For instance, you may qualify with a lower credit score or less time in business. However, MCAs are also more expensive and less regulated than other business loans.
Fed Small Business data shows MCA applicants have the largest partially approved rate at 58%. Only one third of applicants are fully approved, and 9% are denied.
SBA loan or line of credit
SBA loans, or business loans administered by the Small Business Administration, are funding options that cover a wide range of business needs, like buying new equipment, supplementing cash flow, or funding startup costs. A few different types of SBA loans are available, ranging from $500 to $5.5 million in financing to eligible small business owners.
To qualify, you must run a for-profit business in the US and demonstrate the ability to repay the loan. The SBA doesn’t set revenue or business age requirements because these loans are guaranteed by the Small Business Administration and disbursed through banks, credit unions, and other SBA-approved lenders, including online lenders.
Each financial institution sets its own eligibility requirements. Although the SBA guarantees a portion of the loan, it doesn’t lend money directly; banks and other lenders do. That SBA backing reduces the lender’s risk, allowing it to offer lower interest rates or more favorable terms.
Fed Small Business data shows that in 2024, 45% of SBA loan applicants were denied, 32% were fully approved, and 23% were partially approved.
How hard is it to get a business loan FAQ
How hard is it to get approved for a business loan?
Business loan approval depends largely on the type of loan you’re applying for, the financial health of your company, and the lender. Some business loans, like merchant cash advances, are easier to win approval for, but you might pay more in interest, fees, or, potentially, future income.
What credit score is needed for a business loan?
Business loan credit score requirements vary based on the loan type, lender, how much you’re borrowing, your collateral (if any), and more. Traditional lenders may look for scores at or above 680, while alternative lenders may consider lower scores.
Is it smart to get a small business loan?
There are a variety of small business funding options if you need to get a business loan. If you can responsibly repay the loan and interest on the required schedule based on your current cash flow, then getting a small business loan might work for you.
*Shopify Capital loans must be paid in full within a maximum of 18 months, and two minimum payments apply within the first two six-month periods. The actual duration may be less than 18 months based on sales.
