How to get approved for small business financing

This article was paid for by Biz2Credit.

Getting approved for small business financing isn't always easy. In fact, 22% of businesses that applied for financing in 2025 were denied, while another 42% received less funding than they requested, according to the latest Federal Reserve Small Business Credit Survey published in April.

Whether you're looking to manage cash flow, invest in growth or cover a major expense, understanding what lenders are looking for before you apply can boost your odds.

"Specificity is very important to increase your chances of approval," said Rohit Arora, co-founder and CEO of Biz2Credit, a financial platform that provides term loans, revenue-based financing and lines of credit to entrepreneurs and small business owners. "As a lender, we want to feel confident you know what you're doing."

Find out what you'll need to apply for small business financing, what lenders evaluate during the underwriting process and what can hurt your chances of approval.

• What you'll need to apply for small business financing
• What lenders want to see
• How to improve your odds of approval
• Red flags that can hurt your chances

Application requirements vary by lender, financing amount and loan type. But, in most cases, you'll need to furnish financial records, details about your business and a plan for the money.

1. Basic business information:

Lenders typically need your legal business name and address, what industry you're in, your Employer Identification Number (EIN), an explanation of your business structure and the number of years you've been in operation. You may also need to provide formation documents, such as articles of incorporation or organization.

Be prepared to provide a government-issued ID, your contact details, and an explanation of your ownership stake in the business.

2. Financial records and tax returns

To evaluate your company's financial health, lenders typically request:

• Three to six months of business bank statements
• Recent profit-and-loss statements
• A current balance sheet
• Two years of business tax returns

If your business has been operating for less than two years or the financing requires a personal guarantee, you may also have to provide personal tax returns.

3. Business and personal credit history

The loan underwriter will review your credit history to understand how you've managed debt in the past. Depending on the loan type, it may evaluate your business credit profile, your personal credit history or both.

Your business credit profile is based on information reported to commercial credit bureaus, including Dun & Bradstreet, Experian and Equifax. While each bureau uses its own scoring model, business credit scores typically consider factors like payment history, credit utilization, industry risk and public records, such as liens, judgments and bankruptcies.

4. A clear plan for the financing

A formal business plan isn't always required, but lenders want to understand why you're borrowing the money, how you'll use it and how you plan to repay it.

"What could hurt approval odds is if you don't clarify the use of proceeds or don't show the underwriters how well you know your business," Arora said. "Tell us how you are going to use this money in a productive way."

Examples include:

• Purchasing equipment
• Hiring more employees
• Paying off high-interest debt
• Expanding or opening a new location
• Building or improving your website
• Investing in branding or marketing

Underwriters evaluate several factors to determine whether your business can comfortably repay the financing.

1. Solid cash flow: Lenders want to see consistent revenue and enough liquid assets to support regular loan payments.

"If you have a lot of days where you're showing insufficient funds in your bank account, that's not a good sign," Arora said. "It shows that either you have a cash flow problem or you're not balancing your accounts payable versus accounts receivable."

However, a few slow months or a temporary dip in cash flow won't necessarily disqualify your application. Biz2Credit also considers the circumstances, particularly for seasonal businesses or companies seeking financing to smooth out short-term cash flow irregularities.

"Even if your cash flow is low, it should be pretty even keel," Arora said. "There shouldn't be a lot of late or missed payments or open vendor invoices."

2. Positive credit history: "You have to keep your business credit clean," Arora said. "Pending lawsuits, tax liens or open collection accounts create red flags for a lot of lenders."

While traditional banks may set the bar as high as a 680 FICO Score, Biz2Credit accepts borrowers with a 570 credit score for revenue-based financing and a 650 for term loans and business lines of credit.

3. Sufficient time in business: Many traditional lenders look for at least two years of operating history, but online lenders may accept less. For example, Biz2Credit funds companies with 12 months of active operations.

4. Healthy annual revenue: The minimum annual amount required for revenue-based financing typically ranges from $100,000 to $250,000, though some institutional lenders may require $500,000 or more. Biz2Credit approves revenue-based financing and lines of credit for companies with at least $100,000 in consistent annual revenue.

Before you apply for a loan, make sure you're in the best financial shape.

Review your credit reports. Check both your business and personal credit reports before applying. Correct any errors, resolve outstanding issues where possible and make sure the information lenders see is up to date —  such as the incorporation date, state of registration, number of employees and annual sales. Be prepared to explain any inconsistencies or negative marks.

Know your numbers. Know your revenue figures, expenses, profit margins, monthly sales, recent financial performance and industry outlook.

"Understanding your business is very important, including your fixed and variable costs, rent and monthly sales," Arora said. "As the business owner, you should be aware of those numbers."

Understand the lender's eligibility requirements. Review minimum requirements for time in business, annual revenue and credit score before applying. Targeting financing you're more likely to qualify for will save time and help avoid unnecessary hard credit inquiries.

Think outside the bank. While turning to a large financial institution for funding may sound intuitive, they're the least likely to approve small business financing: Big banks — defined as those with $10 billion or more in assets — approve only about 13% of loans, according to the most recent Biz2Credit Small Business Lending Index from 2023. Smaller banks and credit unions both gave the thumbs up to just under 20% of applicants, while alternative lenders like Biz2Credit approved 30%.

Tell a consistent story. A strong application does more than provide the required paperwork. It demonstrates that you understand your business, have a clear purpose for the funds and can manage repayment responsibly. Rather than requesting the maximum amount available, ask for an amount tied to a specific business goal, such as launching a new product, upgrading equipment or increasing inventory ahead of a busy season.

Every lender has its own underwriting standards, but certain issues commonly make approval more difficult:

• Frequent overdrafts or insufficient funds, which may signal cash flow problems.
• Pending lawsuits, tax liens, judgments or other unresolved legal or financial issues.
• Open collections or late payments on your business or personal credit reports.
• High-interest debt that could make additional borrowing difficult to repay.
• No clear explanation of how the financing will be used.
• Limited understanding of your company's financial performance or industry.
• Missing, outdated or inconsistent documentation.

Before applying, take time to organize your financial records, review your credit reports, understand your cash flow situation and lay out exactly how you'll use the funds.

A well-prepared application will make it easier for lenders to assess your business and your ability to repay a loan.

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