To get an unsecured business loan, lenders evaluate different elements of your company.
Specifically, they’ll review the following factors:
- The overall health of your company (with a focus on revenue)
- Your business and personal credit score
- Consistent cash reserves
- Time in operation
Applying with a Traditional Lender
Traditional lenders such as brick-and-mortar banks or credit unions offer borrowers high funding amounts, longer repayment terms and low interest rates. This can make them appealing financing resources, but those benefits come with stricter requirements for applicants.
Traditional lenders require applicants to have good to excellent credit scores (670 and higher) and a lengthy credit history. Banks and credit unions also prefer to work with applicants who have existing relationships with their institution, and have been in business for at least 2 or 3 years. This can be a challenge if you’re seeking unsecured small business startup loans.
The application process with traditional lenders has multiple steps and it can be several weeks to more than a month before you learn whether your loan request is approved and you receive funding.
Qualifying for an Unsecured Business Loan through a Bank
Individual lenders may have different business loan qualifications, so be sure to do your research before applying for an unsecured small business loan.
However, in general, it’s helpful if you meet the following criteria:
- A credit score of 670 or higher
- Been in business for at least 2 years
Applying with an Alternative Lender
If you work with an alternative or online lender, you’ll complete your entire application on the Internet in a matter of minutes (see Fast Capital 360’s application). This is helpful if you need fast unsecured business loans, and you receive funding on the same day as your application’s approval. Alternative lenders also look at your business’s revenue and overall financial health, making it easier to qualify for unsecured business loans.
However, with the streamlined application process and lower barrier to funding, lenders assume more risk. This means your unsecured small business loan could have shorter repayment terms and higher rates.
Qualifying for an Unsecured Business Loan through an Alternative Lender
If you meet these qualifications, your company might be approved for unsecured business funding:
- A credit score of 500 or higher
- Been in business for at least 6 months
- Your business generates revenue of $10,000 a month or $120,000 annually
Related: 8 Steps on How to Get a Business Loan