7 Tips To Get Your Small Business Loan Approved

Getting a small business loan approved is a decision only a lender can make. However, it is possible to influence your credit history and improve your chances of getting approved by the lender of your choice.

If you are counting on a loan to take your small business to the next level, the following tips will help you get approved for the loan you need.

Tips To Get Your Small Business Loan Approved

1. Tidy Up Your Personal Credit

What does your personal credit have to do with getting a small business loan? If you don’t have business credit – or if your business credit is poor – you’ll be leaning on your personal credit to get approved.

If you’re hoping to get approved for a loan through the Small Business Administration (SBA), your personal credit matters.

SBA loans are popular; the SBA guaranteed more than $28 billion to entrepreneurs in 2019. However, the SBA has strict requirements. For example, you need strong personal credit plus substantial business revenue to qualify. You won’t qualify for an SBA loan if you’ve defaulted on a federal student loan or a government-backed mortgage.

While it is not guaranteed that all lenders will take personal credit into consideration in the absence of business credit, some will. It will not hurt to tidy up your personal credit before applying for loans. Even if lenders do not ever look at your personal credit, your efforts will still be beneficial.

2. Create a Rock-Solid Business Plan

Lenders want to know what you’ll use their money for, and they also want to see that you’ve got a strong ability to repay the loan. A business plan is the most common way lenders obtain this information.

Before applying for loans, create a rock-solid business plan that clearly demonstrates how your business will have the cash flow required to cover operational expenses plus your loan payments. When a lender can see this information clearly, they will have more confidence in lending you money.

3. Reduce Your Debt-to-Income Ratio

On both the business and personal side, reduce your debt-to-income ratio as much as possible before applying for a loan. This is one of the most basic factors lenders look for. If your debt is too high compared to your income, lenders see that as a sign that you might not make your payments.

4. Keep Your Daily Bank Balance As High As Possible

There are a couple reasons to keep your daily bank balance as high as possible. Some loans are approved based on a daily bank balance rather than business income. Also, lenders want to know you have cash on reserve to make your loan payments.

5. Boost Business As Much As Possible Prior to Applying

Lenders are more likely to approve loans for small businesses that are generating revenue. If you are just starting out, you won’t have revenue to boost. However, if you are already in business, spend some time boosting your sales as much as you can.

You can boost revenue by:

  • Consulting with a professional marketing firm to launch a new campaign
  • Running PPC ads on a regular basis and then using retargeting
  • Capturing emails and running an email marketing campaign to nurture leads until they become paying customers

There is always something you can do to boost business revenue and show lenders you have the ability to repay a loan.

6. Know your Business and Personal Credit Scores

Knowing your business and personal credit scores will help you get approved because if your score is poor, you can tidy up past due accounts and work to bring your score up before applying for loans.

Business credit is calculated on a score of 0-100. An ideal business credit score would be 75 or higher. Don’t know your score? You can get it from Experian or Dun & Bradstreet.

If you don’t have business credit, your personal credit will play a role in getting approved for a small business loan. In this case, you’ll need a personal score of at least 640 to qualify for most loans.

Getting your Credit Score and Credit Reports

You’re entitled to one free credit report each year, but credit reports don’t always include your actual credit score. Getting your free yearly credit report will tell you where you stand with your accounts, but you’ll probably need to pay a small fee to access your specific credit score.

To qualify you for a loan, most lenders need to look at your specific credit scores. Since each credit bureau scores credit independently, you’ll want to get all of your credit reports from TransUnion, Equifax, and Experian.

Multiple Credit Scores

You may not realize it, but you may have a multitude of credit scores and it’s wise to know all of them before applying for a loan. Generally, you’ve got a FICO and a Vantage credit score. However, there are multiple scores within each of those categories that are calculated by different financial institutions and some scores are only reported to certain bureaus:

  • FICO 5. This score is calculated by Digital Federal Credit Union (DCU) and is only available from Equifax.
  • FICO 8. This score is calculated by American Express, Discover, Bank of America, Walmart, and a couple other financial institutions. American Express reports this score to all three agencies but Discover only reports to TransUnion and Experian.
  • FICO 9. This score is calculated exclusively by Wells Fargo and is only reported to Experian.
  • FICO Bankcard Score 8. This score is exclusively calculated by Commerce Bank and is only available from TransUnion.
  • FICO NextGen. This score is calculated by PenFed Credit Union and HSBC and is only available from Equifax.
  • VantageScore 3.0. This score is calculated by several online financial institutions and is available from all three major credit bureaus from most institutions. 


The above list is not exhaustive, so talk to your financial institutions to find out where they report your credit accounts. You need to know exactly where your credit gets reported so you can get the right reports and tidy up your credit before applying for a loan.

7. Know Lender’s Requirements Before Applying

Before applying for any loan, know the minimum qualifications first. You don’t want to waste your time applying for loans you don’t qualify for.

Meeting the minimum requirements is good but exceeding them is better. Generally speaking, most lenders don’t want to see any recent bankruptcies, delinquencies, poor business revenue, or low credit scores. However, some lenders make exceptions for applicants that are weak in one area and strong in another. For example, if you had a bankruptcy five years ago, but your current business is bringing in high revenue consistently, a lender might consider approving you for a loan.

Choose The Right Lender

Choosing the right lender is important, but who has time to fill out multiple applications? The good news is, by applying for a loan online through banks.com, you can submit your application to multiple lenders with just a single application. With one simple application, you’ll receive offers from various lenders to compare rates and terms. Once you find the loan that’s right for you, you’ll feel secure knowing you’re getting the best loan for your business.

The Takeaway

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Influence your credit history and improve your chances of getting approved for a small business loan by the lender of your choice following these useful tips.

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