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Small business loan requirements

Find out common requirements for a small business loan and compare eligibility requirements of different lenders.

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Small business loan requirements can include a range of important documents and financial details. Banks have a much more involved application process for small business loans, while online lenders are more flexible because they ask for less information overall.

Small business loan requirements

Below is a comprehensive list of requirements for a small business loan. Requirements depend on the lender, and you may not need to provide all of these.

1. Personal credit score

Lenders typically examine your personal credit report when you apply, including the personal credit scores of the co-owners or stakeholders of your business. Lenders often require a personal score of at least 650 from successful loan applicants. If you’re already in business, prepare to submit a credit report for your company as well. Overall, lenders want to see that you’re responsible with your debts, largely because it translates directly into how well your business will be able to repay a loan.

2. Time in business

To qualify for most business loans with online lenders, you’ll need to be in business for at least six months to a year. Your typical bank could require you to be in business for at least two years. If you’re a startup or your business hasn’t begun operations, you may find it harder to get a loan. You can consider a start-up loan or apply for a loan through the Canada Small Business Financing Program (CSBFP). More details about this program can be found below.

3. Annual revenue

Lenders often require businesses to bring in annual revenues of $80,000 or higher before they will consider your application. Monthly, the minimum revenue is usually around $5,000 to $10,000.

4. Personal debt-to-credit ratio

It sounds counterintuitive, but some lenders will consider too much personal credit a risk – after all, you could turn to that credit if your business runs out of money. It’s worth paying down your existing personal debts before applying for a business loan to show lenders that you aren’t too deep in the red.

5. Business cash flow and income

Your business’s debt-to-income ratio is important to creditors too. To be sure that you can meet repayment requirements, some lenders look for a total income that’s at least 1.25 times greater than your total expenses. The higher your cash flow is to pay off your debts, the better.

6. Potential collateral

If you’re applying for a secured business loan, you may need to identify an asset – equipment, inventory or real estate – to back the loan against default. If you prefer not to provide collateral, you’ll need to compare unsecured business loans. You may also be required to sign a personal guarantee that holds you accountable if your business is unable to pay its debts.

7. How you intend to use your funds

You may need to specify exactly how you plan to use the money you borrow. Some lenders may limit how you spend the approved funds. For example, most equipment financing loans restrict you to only use the funds to purchase equipment.

8. Industry

The type of industry your business is categorized in is another key factor for many lenders. Industries like gambling, marijuana or adult entertainment may be seen as risky or a theme your lender doesn’t want to be affiliated with. Seasonal industries like golfing, camping or landscaping, may also scare lenders away from financing your business.

9. A detailed business plan with financial projections

Expect to be questioned about the ins-and-outs of your business when you’re applying for a loan. Show up with a business plan prepared that outlines your business’s objectives, how you’ll use borrowed funds and what your projected cash flow will look like over the next few years. You can include market research about your industry to show your understanding of how your business will fit in.

Which lenders have more flexible requirements for small business loans?

Online lenders generally have more flexible requirements for small business loans compared to traditional lenders like banks and credit unions. But there is a catch: Because they’re easier to get approved for, they also tend to have higher interest rates than banks and credit unions.

Below is a summary of basic requirements for small business loans of some online lenders in Canada.

LenderEligibility requirementsLoan amount rangeKey features
SharpShooter- Have a Canadian bank account
- Place of business located in a Canadian province/territory
- In business for at least 100 days
- Show a minimum of $10,000 in monthly deposits ($120,000/year)
- 500+ minimum credit score
$500 - $250,000
  • Less focus on historical financials and more focus on overall business health and potential.
  • Simple application with pre-approval within minutes.
  • Custom funding based on your cash flow.
  • Get funds in 48-72 hours.
Lending Loop- Have a Canadian bank account
- Place of business located in a Canadian province/territory
- At least 1 year in business
- At least $100,000 in annual revenue
- 640+ minimum credit score
- At least 50% of the directors of the corporation should be Canadian residents
- All directors should have reached the age of majority in the province/territory of residence of the applicant
$10,000 - $500,000
  • Find out if you’re eligible within seconds.
  • Peer-to-peer lending platform.
  • No fees for early repayment.
  • Typically, payments are made in equal amounts every month.
Merchant Growth- Operating for at least 6 months
- Canadian based business
- 550+ credit score
- $10,000 in monthly sales
$5,000 - $500,000
  • Complete the application within 5 minutes.
  • Flexible financing: Your payment matches your business cycle (pay more when you’re busy, less when you’re not)
  • No hidden fees.
  • Get funds in 24 hours.
Loans Canada- Operating for at least 100 days
- Be a Canadian business owner
- 410+ credit score
- $4,1666 in monthly revenue ($50,000/year)
$2,000 - $350,000
  • Broker with the largest lender network.
  • Minimum credit score of 410.
  • Get funds in as little as 48 Hours.
OnDeck- 6 months in business
- Minimum $10,000 monthly revenue
- 600+ credit score
- Approved industry
$5,000 - $300,000
  • Fast application that only asks for your basic business information.
  • Find out your loan offers without affecting your credit score. OnDeck will do a soft pull (unless your credit file is restricted).
  • Offers fixed term loans, lines of credit and flex funds.
  • Choose between fixed daily or weekly payments.
  • Get funds in as little as in as little as 24 hours.
Lendified- Own a business that has been operating in Canada for at least 1 year.
- Be at least 18 years old (and 19 in some provinces).
- Have at least $100,000 in total revenue in the past 12 months.
- Have a good to excellent credit score (around 610 or above).
$5,000-$150,000
  • Share basic information about yourself, your business and financial performance.
  • Refinances loans for small business owners.
  • Get funds in 48 hours.
  • Bi-weekly payments.
Thinking Capital- Canadian business
- In business for at least 6 months
- Show average monthly card sales of at least $7,000
$5,000-$300,000
  • Available 24/7.
  • Apply within minutes.
  • Fixed financing and flex financing are available.
  • Get funds in as little as 48 hours.
  • Daily, weekly or bi-monthly payments.

Which business loan requirement is most important?

It’s hard to say which factor is the most important when it comes to your business loan, with each lender weighing criteria differently. For one lender, it could be your business’s minimum annual revenue that decides the success of your application, while another lender could look more closely at how long you’ve been in business, your personal credit score or the collateral you’re able to offer up.

In the end, it’s best to research the specific lender you’re interested in and ask exactly what they’re looking for when it comes to approval. Otherwise, your application could be rejected.

Comprehensive guide to business loans

What information do I need to provide?

Many larger financial institutions, like banks, will require you to make an appointment to complete an application in person. However, newer online lenders automate the process with the convenience of a completely online application.

To initially complete your application, you’ll typically submit:

  • Your full name, contact information and SIN number.
  • Your full business name, address, phone number and email address.
  • Your industry and the date you started your business.
  • The annual revenue of your business.
  • Your personal bank account information and income earned.
  • How much you’re looking for in funding.
  • How you intend to use your loan.

What documents will I need to provide after I apply?

After applying for a business loan, a representative will likely call you to go over your application. To confirm the information you’ve provided in your initial application, you’re often required to upload further documentation of your business’s financial details.

Whether you’re applying for a business loan via an online lender or a traditional lender like a bank, here’s what you may need to provide (although it will depend on the lender):

  • Bank statements. Lenders typically ask to see two years of your business’s bank statements to verify your financial status.
  • Revenue statements. Also called profit-and-loss statements, lenders often require a recent year-to-date revenue statement accompanied by statements from the past two years.
  • Balance sheets. A good indication of your business’s financial standing, these statements list your assets, capital and any liabilities.
  • Business and personal tax returns. The younger your business, the more likely a lender will require your personal tax returns as part of your application.
  • Your personal financial details. Lenders may want to see your full personal assets and liabilities, including your home, credit cards, loans, cars and other investments, as well as debts like credit card balances and any loans.
  • Personal credit score. While most lenders will use your SIN number to access your personal credit reports, you may need to prepare to submit copies of your credit reports from the two main reporting agencies: Equifax and TransUnion. A personal score of 649 or lower could jeopardize your application.
  • Insurance or collateral. To lower its risk, a bank may require you to put up an asset or take out insurance to pay off the loan should something happen.
  • Business plan. Presenting a solid business plan can showcase your company and team, increase your overall credibility and show a lender that you’re serious about the success and future of your business.

If your lender provides the option to upload information online, you can protect the integrity of your documentation by submitting it as a PDF. You may also be required to fax copies of important documents or scanned ID’s before a lender will approve your application.

Download the business plan checklist

Although a business plan may seem like a lengthy document, if you break it up into sections and focus on one at a time, you’re well on your way to a convincing position. Use our checklist to make sure you’ve ticked all the important boxes of what an excellent business plan is.

How to qualify for a business loan: A step-by-step guide

Step 1: Pinpoint why your business needs a loan

Knowing exactly why your business needs financing is key to deciding what type of loan you need, which lender to go with and how much it’s going to cost you.

Step 2: Calculate how much you need

Do the math and add up your expenses. This will help you narrow down lenders: Most have minimum and maximum borrowing amounts. It’s generally not a good idea to borrow more than your business needs because you’ll end up paying more in interest.

Step 3: Review your credit reports

Before you apply, check your personal and business credit reports for errors. If you notice anything wrong, contact the financial institution and the credit bureaus to have it changed. Doing this before you apply can not only up your chances of being accepted, but it can also help you qualify for more favourable rates and terms.

Full checklist for small business loan requirements

  • Personal credit score
Request a copy of your personal and business credit reports from Equifax, TransUnion and Dun & Bradstreet.
  • Age of business
The older, the better. Lenders often require you to have been in business for at least a year or two.
  • Industry type
Your industry could affect the type of loan you qualify for. Some lenders have restrictions for lending to business in industries such as gambling or cannabis.
  • Funding amount needed
Ask for only as much as you think you’ll need based on your assessment as well as past business needs.
  • Intended use of loan
Be ready to discuss with your lender how you’ll use your funding.
  • Minimum annual revenue
Lenders often require a minimum annual revenue of $80,000. If you’ve been in business for less than a year and are applying for a startup loan, minimum monthly revenue requirements typically start around $7,000. Lenders may also set maximum annual revenue requirements. The Canada Small Business Financing Program (CSBFP), for example, has a maximum annual revenue cap of $10 million.
  • Business bank statements
Lenders typically like to see at least two years of your business’s bank statements. If you are a young company, provide as much information as you can to support your application.
  • Revenue statements
Prepare a year-to-date revenue statement that documents your company’s net sales, cost of goods and administrative expenses.
  • Balance sheets
Balance sheets provide a picture of your business’s overall assets, liabilities and shareholders’ equity.
  • Business and personal tax returns
Lenders will want to confirm your income and revenue reported to the CRA —on both your business’s and your personal returns.
  • Business plan
A solid business plan boosts your credibility and helps convince lenders that you’re worth their investment and that you’re serious about creating a successful business.
  • Business debt schedule
Reference free templates online to assemble a comprehensive account of your business’s outstanding loans and other debts.
  • Revenue forecast
Lenders will want to know your projections for expected revenue in the coming months.
  • Collateral documentation
Be ready to document inventory, real estate or equipment that you intend to offer as collateral if applying for a secured business loan.
  • Payroll records
You may be required to submit documentation of your employee and payroll records when applying for your business loan.

I want to apply for a loan through the Canada Small Business Financing Program. Am I eligible?

You can apply for these loans through a chartered bank, credit union or a caisse populaire. They are at least 75% backed by the Government of Canada. Your business must make under $10 million in revenue annually to be eligible for this program.

Qualifying for one of these loans comes with an involved qualification process and strict eligibility criteria. Since you can’t use these loans to finance certain types of businesses, you’ll need to prove that your business meets the requirements. You’ll also need to use the funds for specific purposes – so be sure this type of funding makes sense for your business.

You can learn more about the Canada Small Business Financing Program (CSBFP) here.

Common business loan application mistakes

  • Making major changes to your business. Now is not the time to take risks: Lenders want to see that you’re stable.
  • Forgetting to submit your business plan. This is not only one of the key business loan requirements, it’s also where you get to make a case for yourself and show how serious and dedicated you are.
  • Not paying attention to your credit score. Your credit score is sometimes the only financial information underwriters check. Don’t apply for something you’ll automatically be disqualified from.
  • Lying on your application. While not all lenders cross check your financial history with your application, many do. Eligibility requirements are there in part to protect you from getting yourself into a financial situation you can’t afford – and lying won’t help you get out of debt.
  • Missing deadlines. It doesn’t look good for you – especially when you’re trying to convince a lender you can make payments on time – if you can’t even get them documents when they ask for them.

Bottom line

Depending on the size of your business and desired loan, you may qualify for more than one type of financing from a variety of lenders. Keep in mind that traditional banks often have stricter business loan requirements and application processes. You could find that online lenders are a better option for your financial needs, especially since they usually offer comparable – or better – interest rates and fees, less strict eligibility criteria and an easier application process.

Before applying for a loan, explore your financing options and the business loan requirements of various lenders to find a business loan that best fits your situation and helps you remain profitable and successful in the years to come.

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