Background

Small-business lending has expanded beyond traditional banks to include online and alternative lenders, each weighing similar core factors differently. While banks often emphasize historical financials and collateral, online lenders may weigh cash flow and speed of repayment more heavily (SBA.gov). In my 15 years helping clients, the applications that succeed are those that present clear, verifiable records and a realistic plan for repayment.

How lenders evaluate applications

Lenders typically combine quantitative and qualitative reviews:

  • Credit history and business/owner credit scores — show repayment behavior and account management.
  • Cash flow and profitability — lenders want evidence cash flow covers debt service (look for a healthy Debt Service Coverage Ratio or consistent bank deposits).
  • Financial statements and tax returns — at minimum, lenders expect 12–24 months of profit & loss (P&L), balance sheets, and signed business tax returns.
  • Business plan and projections — a concise plan that explains the market, revenue drivers, and conservative financial forecasts.
  • Collateral and personal guarantees — assets or owner guarantees reduce lender risk and can improve terms.
  • Industry and management experience — lenders assess whether the borrower understands and can compete in their market.
  • Documentation and organization — complete, well-organized files speed underwriting and signal credibility.

For more on what lenders check in bank records and statements, see this guide: What Lenders Verify in Bank Statements for Small Business Loans.

Real-world example

A retail client with steady sales but thin margins strengthened their application by: cleaning up bank deposits to separate personal and business funds, providing 18 months of P&L and a 12-month cash-flow forecast showing seasonal peaks, and offering inventory as partial collateral. The clearer documentation reduced perceived risk and led to approval.

Who is affected / who’s eligible

Most lenders consider sole proprietors, partnerships, LLCs and corporations. Specific criteria vary: some lenders require two years of business history, while alternative lenders or SBA-guaranteed loans may accept startups with stronger owner credit or detailed projections (SBA.gov; Federal Reserve Small Business Credit Survey).

Quick documentation checklist (to prepare before applying)

  • Business and personal tax returns (last 2 years)
  • Business P&L and balance sheet (last 12–24 months)
  • Recent bank statements (3–12 months)
  • Accounts receivable/payable aging (if applicable)
  • Business plan executive summary and 12-month cash-flow forecast
  • List of collateral and supporting valuations
  • Copies of business licenses, leases and insurance

See a full documentation checklist here: Documentation Checklist to Speed Up Small-Business Loan Approval.

Professional tips to improve approval odds

  1. Separate personal and business finances — lenders flag commingling as a risk.
  2. Reconcile accounts and explain outliers — prepare short notes for any large, one-time deposits or withdrawals.
  3. Strengthen the cash-flow story — include conservative sales projections and sensitivity scenarios showing repayment even with a revenue drop.
  4. Improve credit before you apply — address collections and correct credit-report errors (check both business and personal reports).
  5. Offer collateral or a limited personal guarantee if needed — it can lower rates or unlock larger amounts.
  6. Tailor your business plan to the lender — banks want historic performance; alternative lenders prioritize near-term cash flow.

Common mistakes to avoid

  • Submitting incomplete or disorganized documents — slows or kills an application.
  • Overly optimistic projections with no supporting assumptions.
  • Mixing personal and business finances or failing to provide tax returns.
  • Assuming only credit score matters — lenders look at the full credit-and-cash-flow picture.

Frequently asked questions

  • What minimum credit score do lenders require?
    Requirements vary. Traditional banks often look for higher personal credit (e.g., 680+), but some alternative lenders consider lower scores if cash flow is strong (Federal Reserve Small Business Credit Survey).

  • Can I get a loan without a business plan?
    Short-term or small lines of credit sometimes fund without a full plan, but most term loans and SBA-backed products expect at least an executive summary and a 12-month forecast.

  • How long does approval take?
    Timelines vary: online lenders can approve in days; banks and SBA loans often take several weeks to months depending on documentation and underwriting complexity.

Related FinHelp resources

Professional disclaimer

This content is educational and not personalized financial advice. For guidance tailored to your situation, consult a financial or lending professional.

Authoritative sources

In my practice I’ve found that applications with organized, conservative projections and clean financials move fastest through underwriting. Preparing those items before you apply is the best single step to improve approval odds.