Different alternative nonbank lenders may consider varying factors when evaluating your application for approval. In general, lenders typically consider the following:
- Personal or business credit score
- Monthly or annual revenue
- Time in business
- Cash flow
Certain criteria are specific to different types of lending products. For instance, with accounts receivable financing, lenders want documentation of your outstanding invoices. For merchant cash advances, lenders may want documentation of recent revenue levels supporting your sales projections.
In addition to a business owner’s personal credit, Dell notes his company will “review the last few months of bank statements to see how they’re doing from a revenue perspective, to see if they have any bounced payments, late payments.”
Additionally, Dell says, “We’re going to pull a background just to look for any judgments, liens or criminal history.”
There may be other requirements for loans of larger amounts. For example, of alternative financing, Dell notes, “If it’s a large deal, we’ll ask for some very basic financials – a balance sheet, P & L, A/R report.”
With conventional lenders, qualifying criteria also may be stricter for loans in larger amounts or those with lower interest rates. As with conventional lenders, you can often secure higher amounts and more favorable terms if you have a strong credit rating and revenue history.
You may wish to check your credit score and take steps to build your business credit before approaching conventional and nonbank lenders for business loans.