{"id":803260,"date":"2019-09-08T16:45:19","date_gmt":"2019-09-08T20:45:19","guid":{"rendered":"https:\/\/www.finder.com\/ca\/?p=803260"},"modified":"2025-02-26T06:55:05","modified_gmt":"2025-02-26T11:55:05","slug":"business-loan-requirements","status":"publish","type":"post","link":"https:\/\/www.finder.com\/ca\/business-loans\/business-loan-requirements","title":{"rendered":"Business loan requirements: Will you get approved?"},"content":{"rendered":"

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

Business loan requirements<\/h3>

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

1. Personal credit score<\/strong><\/h4>

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<\/a> of at least 650 from successful loan applicants. If you\u2019re already in business, prepare to submit a credit report for your company as well. Overall, lenders want to see that you\u2019re responsible with your debts, largely because it translates directly into how well your business will be able to repay a loan. If you have bad credit, there are bad credit business loans available<\/a>, but they come with steeper interest rates.<\/p>

2. Time in business<\/strong><\/h4>

To qualify for most business loans with online lenders, you\u2019ll 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\u2019re a startup or your business hasn\u2019t begun operations, you may find it harder to get a loan. You can consider a start-up loan <\/a>or apply for a loan through the Canada Small Business Financing Program (CSBFP).<\/p>

3. Annual revenue<\/strong><\/h4>

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.<\/p>

4. Personal debt-to-credit ratio <\/strong><\/h4>

It sounds counterintuitive, but some lenders will consider too much personal credit a risk \u2013 after all, you could turn to that credit if your business runs out of money. It\u2019s worth paying down your existing personal debts before applying for a business loan to show lenders that you aren\u2019t too deep in the red.<\/p>

5. Business cash flow and income<\/strong><\/h4>

Your business\u2019s 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\u2019s at least 1.25 times greater than your total expenses. The higher your cash flow is to pay off your debts, the better. Banks like CIBC want to see that you have positive revenue for at least 12 to 24 months.<\/p>

6. Potential collateral<\/strong><\/h4>

If you\u2019re applying for a secured business loan, you may need to identify an asset \u2013 equipment, inventory or real estate \u2013 to back the loan against default. If you prefer not to provide collateral, you\u2019ll need to compare unsecured business loans<\/a>. You may also be required to sign a personal guarantee<\/a> that holds you accountable if your business is unable to pay its debts. It\u2019s a legal commitment you or a guarantor makes to take personal responsibility if you default on your business loan. This might mean using your personal assets to repay the business loan.<\/p>

7. How you intend to use your funds<\/strong><\/h4>

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<\/a> restrict you to only use the funds to purchase equipment.<\/p>

8. Industry<\/strong><\/h4>

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\u2019t want to be affiliated with. Seasonal industries like golfing, camping or landscaping, may also scare lenders away from financing your business.<\/p>

9. A detailed business plan with financial projections<\/strong><\/h4>

Lenders want to see that you have valid industry experience. Expect to be questioned about the ins-and-outs of your business when you\u2019re applying for a loan. Show up with a business plan prepared that outlines your business\u2019s objectives, how you\u2019ll 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.<\/p>

Compare business loan requirements<\/h3>

Online lenders have more flexible small business loan requirements compared to traditional lenders like banks and credit unions. But there is a catch: Because they\u2019re easier to get approved for, they also tend to have higher interest rates.<\/p>

Below is a summary of small business loan requirements from different lenders in Canada.<\/p>
Lender<\/th>Eligibility requirements<\/th>Key features<\/th><\/th><\/tr><\/thead>
\"Merchant<\/td>- Operating for at least 6 months
- Canadian based business
- 550+ credit score
- $10,000 in monthly sales
<\/td>
  • Borrow $5,000 \u2013 $800,000<\/li>
  • Payment matches your business cycle (pay more when you\u2019re busy, less when you\u2019re not)<\/li>
  • Get funds in 24 hours.<\/li><\/ul><\/td>
Go to site<\/a><\/div>
\"Loans<\/td>- Operating for at least 9 months
- Operating Canadian Business Bank Account
- Over $10,000 in monthly sales ($120,000\/year)<\/td>
  • Borrow $500 - $50,000<\/li>
  • Broker with the largest lender network.<\/li>
  • Minimum credit score of 410.<\/li>
  • Get funds in as little as 48 Hours.<\/li><\/ul><\/td>
Go to site<\/a><\/div>
\"Journey<\/td>- 6 months in business
- Minimum $100,000 annual gross revenue
- 600+ credit score<\/td>
  • Borrow $10,000 - $500,000<\/li>
  • Find out your loan offers fast without affecting your credit score.<\/li>
  • Get funds in as little as in as little as 24 hours.<\/li><\/ul><\/td>
Go to site<\/a><\/div>
\"Driven\"<\/td>- Canadian business with 600+ credit score
- In business for at least 6 months
- Average monthly sales of $7,000+
- Business bank account
- Business operating in Canada<\/td>
  • Borrow $10,000 - $500,000<\/li>
  • Available 24\/7.<\/li>
  • Apply within minutes.<\/li>
  • Fixed financing and flex financing are available.<\/li>
  • Get funds in as little as 48 hours.<\/li>
  • Daily, weekly or bi-monthly payments.<\/li><\/ul><\/td>
\"Sharpshooter<\/td>- 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 $4,166 in monthly deposits ($49,992\/year)
- No minimum required credit score<\/td>
  • Borrow $1,000 - $300,000.<\/li>
  • Less focus on historical financials and more focus on overall business health and potential.<\/li>
  • Custom funding based on your cash flow.<\/li>
  • Get funds in 48-72 hours.<\/li><\/ul><\/td>
<\/div>
\"Swoop\"<\/td>
  • 24 months minimum time in business<\/li>
  • $10,000 \/month minimum revenue<\/li><\/ul><\/td>
  • Business loan broker partnered with banks and alternative lenders.<\/li>
  • Get your loan offers for free.<\/li><\/ul><\/td>
\"CIBC\"<\/td>- Industry experience
- Personal financial investments in your company
- Positive revenue for at least 12 to 24 months
- Good credit score
- Detailed business plan<\/td>
  • Borrow from $10,000.<\/li>
  • Choose between a fixed and variable interest rate.<\/li>
  • Choose between a secured or unsecured business loan.<\/li><\/ul><\/td>
Read review<\/a><\/div><\/td><\/tr><\/tbody><\/table>
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\n \n \n <\/circle>\n <\/path>\n <\/svg>\n <\/span>\n Which business loan requirement is most important?<\/span>\n <\/h4>\n
\n

It\u2019s 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\u2019s minimum annual revenue that decides the success of your application, while another lender could look more closely at how long you\u2019ve been in business, your personal credit score or the collateral you\u2019re able to offer up.<\/p>

In the end, it\u2019s best to research the specific lender you\u2019re interested in and ask exactly what they\u2019re looking for when it comes to approval.<\/p>\n <\/div>\n <\/div>\n<\/div>\n

Comprehensive guide to business loans<\/a><\/p>

<\/a>What information do I need to provide?<\/h3>

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.<\/p>

To initially complete your application, you\u2019ll typically submit:<\/p>