If you’re applying for a business loan, it’s easy to get caught up in the checklist—bank statements, tax returns, business plans. But lenders aren’t just scanning your paperwork for boxes to tick. They’re evaluating risk, reliability, and repayment potential.
Whether you’re working with a bank, SBA lender, or alternative finance company, here’s what they’re really looking for behind the scenes.
Consistent and Verifiable Cash Flow
More than anything else, lenders want proof that your business generates enough income to cover operating expenses and loan payments. It’s not just about revenue—it’s about what’s left after expenses.
What to prepare:
Year-to-date profit and loss statements
At least two years of tax returns (if available)
Explanation for any dips or irregularities
Lenders often calculate a debt service coverage ratio (DSCR) to gauge whether your cash flow is strong enough. A ratio of 1.25 or higher is generally preferred.
Responsible Credit Behavio
Your personal and business credit history matters. Even if your business is applying, most lenders will review the owner’s credit report.
They’re looking for:
On-time payment history
A manageable level of debt
No recent bankruptcies, liens, or defaults
A personal credit score of 650 or higher is often the baseline for SBA loans and many traditional lenders. Alternative lenders may go lower but may charge higher rates in return.
A Clear Use of Funds
Lenders want to know how their money will be used—and why it makes sense. Vague goals like “expand the business” won’t cut it. Be clear, specific, and strategic.
Stronger examples include:
Purchasing equipment to increase production capacity
Hiring two new employees to fulfill pending contracts
Expanding to a second location with projected revenue growth
If the loan request aligns with your financials and growth plan, that increases confidence in your repayment ability.
Industry and Business Stability
Lenders look at how long you’ve been operating and how stable your industry is. A five-year-old business in a steady field like professional services is viewed differently than a startup in a volatile niche.
Tips:
If you’re newer, highlight owner experience and market opportunity
If you’re in a seasonal business, show how you manage cash flow year-round
Commitment and Skin in the Game
If you’re not personally invested in the business, lenders will question why they should be. Most expect you to have contributed capital and taken on some risk.
For SBA loans, lenders often want to see that the owner has invested at least 10 to 20 percent of their own funds into the business.
Conclusion
Lenders don’t need perfection, but they need confidence. When you present a clear, consistent story supported by real numbers and thoughtful planning, you shift the conversation from “Should we lend?” to “How soon can we fund this?”
At BorrowPartner, we help business owners strengthen their applications and connect with lenders that fit their goals. If you’re getting ready to apply, let’s make sure your file stands out.
Have questions about your loan readiness? Reach out anytime. We’re here to help.
