Lending Library

A business line of credit can be one of the most flexible financing tools available for small businesses. Unlike a term loan that provides a lump sum upfront, a credit line works more like a business credit card. You draw funds on an as-needed basis, repay the money you borrow, and only pay interest on the outstanding balance. That flexibility can provide a valuable safety net for cash flow gaps, unexpected expenses, or opportunities to expand your business.

Yet before a lender approves you for a business line of credit, you’ll need to meet certain eligibility requirements. Lenders carefully review your creditworthiness, time in business, financial history, and other risk factors to determine if you qualify. Understanding these requirements upfront can save you time, improve your approval odds, and help you secure more favorable borrowing rates and repayment terms.The following guide covers everything you need to know about how to qualify for a business line of credit. You’ll learn the key factors lenders review when you apply for a credit line, pitfalls to avoid, and the steps involved in the application process. We’ll also cover alternative financing options to consider if a business line isn’t the right fit for your company.

Key eligibility requirements for a business line of credit

When you apply for a business line of credit, a lender will look at several factors to assess your risk as a borrower. Specific eligibility requirements vary, but the following table provides an overview of the minimum requirements you typically need to satisfy when you apply for this type of financing.

Now, let’s dive deeper into the individual qualification details lenders often consider when you apply for a business line of credit.

Minimum credit score, revenue, and time in business

Your credit score is a major factor lenders rely on to determine eligibility for business lines of credit. Many online lenders require a minimum personal FICO® Score of 600 for an unsecured business line of credit. Though with certain business credit lines and business loans, the lender may consider your business credit score as well.

Credit standards tend to be tighter with traditional lenders, and minimum credit score requirements could be as high as a 700 FICO® Score. But for secured credit lines, lenders may approve borrowers with slightly lower scores.

Annual revenue also plays a critical role in your ability to access business funding. Every lender has different minimum borrowing criteria. But small businesses that generate $100,000 or more in annual revenue typically have a better chance of qualifying for revolving credit lines. 

Additionally, the longer your business has been in operation, the stronger its borrowing profile. Some lenders prefer financing applicants to have at least one to two years of operational history. Yet startups with 6 months or more in business may still qualify for a new credit line depending on the lender—especially if the applicant has good credit, collateral, solid cash flow, or other compensating factors.

Collateral and personal guarantees: What lenders expect

It’s possible to access an unsecured line of credit for your business, especially if you work with an online lender. Yet many traditional lenders prefer borrowers to put up some sort of collateral to back their business credit lines or loans. So, it’s no surprise that the Federal Reserve’s 2023 Small Business Credit Survey found that 55% of business financing applicants cited “no collateral requirement” as a main reason they chose an online lender over a bank.

Remember, with a secured line of credit you pledge business assets to back your revolving financing such as accounts receivable, equipment, or inventory as collateral. If collateral isn’t available, lenders often require a personal guarantee—a legal promise that you’ll repay the debt personally if your business cannot. This adds risk for the borrower but can increase your odds of approval.

Documentation requirements for business line of credit

Once you understand the basic eligibility requirements for a business credit line, the next step is preparing your documents. Organized records not only speed up the application process, but can also help you appear more professional to lenders.

Typical documentation for credit line application

Many lenders will request a similar set of documents when you apply for a business line of credit (though online lenders often require less documentation compared to traditional banks). To expedite the process, prepare the following documents in advance.

Having the right documents ready upfront demonstrates strong organizational skills and may increase your chances of approval.

How to apply for a business line of credit

Applying for a business line of credit involves more than simply filling out a form. Here’s a step-by-step guide to simplify the process. 

Step 1: Pre-qualification: Evaluate your position

Before you apply for a business credit line, assess your financial health. Review your credit scores, cash flow, and existing debt obligations. You can request your three personal credit reports (Equifax, TransUnion, and Experian) for free from AnnualCreditReport.com. It’s also possible to request your business credit reports and scores (often for a fee) from business credit reporting agencies like:

• Dun & Bradstreet
• Experian
• Equifax

Reviewing your personal and business credit information can help you understand potential strengths and weaknesses before you submit any financing applications. For example, if your revenue is strong but your credit scores are borderline, consider improving your credit first so you’ll be in a better position to qualify for competitive interest rates and borrowing terms.

Step 2: Compare lenders and key terms

Not all lenders are the same. Traditional banks often offer lower interest rates, but they may have stricter qualification requirements. Online lenders tend to be more flexible and faster with financing approvals, but may charge higher interest rates.

As you compare lenders, weigh factors like:

• Interest rates (APR)
• Credit limit
• Fees (annual fees, draw fees, prepayment penalties, etc.)
• Repayment terms
• Flexibility in drawing and repayment

The Federal Reserve’s 2023 Small Business Credit Survey found that 71% of business financing applicants received at least a partial approval (business lines of credit, loans, or cash advances) from online lenders. But when seeking funding from large banks, approvals dropped to 68%, and credit union approvals fell to 65% during the same period. These figures highlight the importance of shopping around.

Step 3: Submit the application and manage next steps

After you choose a lender, complete the application. Provide accurate financial information and attach all required documents.

Next, most lenders will perform a hard credit inquiry which may have a slight negative impact on your credit score. According to myFICO, the addition of one hard inquiry on your credit report results in a loss of less than five points from most people’s FICO® Scores. And hard credit inquiries only factor into your FICO Score for 12 months.

After you submit your application, you can expect a response. Possibilities include:

• Conditional approval
• Request for more documentation
• Application denial
• Collateral appraisal request (if required)

A final decision often happens within days (or sometimes sooner) with online lenders. With traditional banks and credit unions, it could take weeks to hear back about a decision. If a lender approves you, be sure to review the agreement carefully before you sign the final financing agreement. Pay close attention to interest rates, repayment terms, and whether the credit line is secured or unsecured.

Common pitfalls and how to avoid them

Even strong businesses can face financing denials if they make mistakes during the application process. Below are some common pitfalls to avoid.

What not to do when applying for a business line of credit

• Don’t exaggerate revenue. Lenders will verify the figures on your application and financial statements through tax returns and bank statements.
• Don’t submit incomplete applications. Missing documents could delay approval or result in the outright denial of your funding application.
• Don’t ignore personal credit. Many lenders review both business and personal credit scores when you apply for a business line of credit.‍
• Don’t overapply. Too many applications can trigger multiple hard inquiries, potentially lowering your credit score in the process.

Special considerations and alternatives

Although a business line of credit represents a flexible financing solution, they aren’t the ideal borrowing vehicle for every business. Some businesses may have a more difficult time qualifying for this type of financing and, as a result, may want to consider alternative borrowing solutions.

Who qualifies more easily?

Businesses with at least two years of operations, strong cash flow, and collateral typically have the easiest path to approval for revolving credit lines. However, startups with strong personal credit and solid business plans may still qualify with online lenders.

Pros and cons of alternative financing options

If your business doesn’t meet the standard borrowing criteria for a line of credit or if you want to explore other financing solutions. Here are a few alternatives to consider, along with some basic pros and cons of each.

Alternatives to business lines of credit

• SBA Loans: Backed by the government, SBA loans often feature competitive rates and longer repayment terms but can be harder to qualify for. (SBA Loan Programs)
• Business Credit Cards: Easier to qualify for than credit lines, these work well for smaller, everyday purchases.‍
• Short-Term Loans: Provide quick funding, but often come with higher interest rates.

Pros and cons of alternative financing options

Bottom line

Qualifying for a competitive business line of credit requires research, preparation, and an understanding of what lenders look for in a well-qualified applicant. But if you focus on your credit score, revenue, collateral, and documentation, there’s a good chance you may improve your approval odds.

If you don’t qualify today, don’t get discouraged. Strengthening your credit, improving cash flow, and building operational history is all progress in the right direction for future financing applications. Remember, each step you take improves your business’s financial foundation.

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If you run a construction company, you know how challenging securing the right financing for your business can be. Whether you want to expand your business, purchase equipment, consolidate certain business debts, or supplement your cash flow, an SBA loan could be the solution.

SBA loans offer flexible, affordable funding options to help contractors grow, stay liquid, and compete for larger jobs. From equipment financing to contract management, the right loan program could set you up for long-term success.

Why SBA loans work for construction firms.

SBA loans, like the SBA 7(a) and SBA 504 programs, are ideal for industries with:

• Capital-heavy operations (like vehicles or equipment)
• Project-based cash flow
• Long payment cycles (including delayed or staggered payment timelines)

But unlike traditional commercial construction financing options, SBA loans offer key benefits to smaller contractors, like:

• Lower interest rates (fixed)
• Longer repayment terms (usually 10 to 25 years)
• Lower down payments
• Higher approval odds for newer or growing businesses

Since these loans are partially government-backed, SBA lenders are often more willing to work with contractors—even those with uneven revenue or less time in operations. Because of this, many small businesses rely on these loans to fund their construction, renovation, and refinancing needs.

Top SBA loan types for contractors.

The SBA offers three main loan programs for contractors: SBA 7(a) loans, SBA Express loans, and SBA 504 loans. These are the main benefits of each, and which types of businesses they’re geared toward.

SBA 7(a) loan

SBA 7(a) loans are one of the most flexible options for small businesses. Construction companies can use them for working capital, equipment financing, expansion, debt refinancing, and more. Loan amounts cap out at $5 million and come with long repayment terms—up to 10 years (general use) or 25 years (real estate).

These loans are ideal for contractors with ongoing project needs, plans for future growth, and new acquisitions.

SBA Express loan

SBA Express Loans typically have a faster turnaround time than traditional business financing. However, interest rates may be higher. Loans cap out at $500,000. Collateral isn’t required for loans up to $50,000.

These are geared toward businesses seeking immediate working capital or smaller equipment purchases.

SBA 504 loan

SBA 504 loans are designed for purchasing fixed assets like heavy equipment or machinery, warehouses, or commercial real estate. They may also be used to consolidate or refinance certain business debts.

These loans are structured with 10- to 25-year repayment terms, fixed interest rates, and up to a 10% down payment requirement. The maximum loan amount is $5.5 million (with exceptions).

SBA 504 loans are best for contractors investing in large, long-term assets.

What construction companies can finance with SBA loans.

SBA loans for construction companies are versatile. Business owners can use funds for things like:

• Heavy equipment financing (excavators, backhoes, forklifts, trenchers, etc.)
• Vehicles (work trucks, trailers, fleet vehicles, etc.)
• Office expansion (either leasing or buying warehouses or land)
• Working capital for materials, labor, or insurance while waiting on project payouts
• Hiring new workers or subcontractors before project payments arrive
• Bonding and licensing costs (to meet or maintain business compliance requirements)
• Consolidating or refinancing eligible business debt
• New business acquisition

Check with different SBA lenders—and SBA loan programs—to find the right solution for you.

Overcoming construction industry-specific financing challenges.

Dealing with complex financing challenges as a construction business? Here are some solutions:

• Irregular cash flow—Use SBA funding to bridge gaps between billing milestones
• Delayed payments—Get a line of credit or working capital to meet payroll and vendor obligations
• Equipment depreciation—Spread out costs with fixed-rate SBA loans instead of using up all available cash
• New project acquisition and onboarding—Invest in mobilization before that first payment hits

SBA eligibility requirements for construction businesses.

Business loans for contractors, even loans through the SBA, come with their share of requirements. While every SBA loan program operates a little differently, these are the main SBA loan requirements:

• U.S.-based, for-profit business
• Meet SBA size standards (typically under $39.5 million in annual revenue)
• 2+ years in operation (lenders may work with startups with considerable experience and a strong business plan)
• Minimum personal credit score (usually 650+) and business credit score (usually 165+)
• Proof of ability to repay loan funds (can be shown through historical revenue, cash flow projections, or project pipeline)
• Collateral like commercial real estate, equipment, or accounts receivable (requirements depend on loan size)
• Personal guarantee (typically required for those with 20% business ownership)

SBA loans for construction companies may also have maximum revenue requirements. Specific lenders may have their own fees and other criteria.

How to strengthen your SBA loan application as a contractor.

Even if you don’t have the best credit or most established firm, you could still qualify for a business loan as a contractor. Here are some ways to overcome the odds:

• Show project history through completed projects and success metrics
• Include detailed cash flow projections (accounting for delayed payments and retainage)
• Highlight equipment financing needs and explain how new equipment will increase project capacity or ROI
• Provide lenders with relevant certifications and licenses illustrating business legitimacy and compliance
• Prepare a business plan with clear growth strategy and use of funds

Key considerations before you apply.

Ready to apply for business financing? Do these things first:

• Make sure you meet both the SBA’s and the specific lender’s eligibility requirements
• Consider seller financing for used equipment alongside an SBA loan
• Look for lenders experienced working with construction firms
• Review loan contract terms carefully
• Be prepared to explain slow periods and your ability to cover loan payments during off-seasons

Be sure to apply before you need the funds so you’ll have them when needed.

SBA loans help contractors grow.

As a construction firm, you could leverage an SBA loan to manage contracts, purchase equipment, fund growth, and even refinance certain debts. These loans can provide the reliable, flexible capital your company needs to take on bigger—and better—projects, build a stronger team, and succeed against the competition.

Ready to apply? Find the SBA funding you need with Lendio.

The retail industry has always been competitive, but recent shifts have turned up the pressure. Customer expectations are high, e-commerce is expanding at record speed, and the cost of doing business continues to rise. Yet, opportunities are still available to business owners who are prepared to adapt quickly.

Success often comes down to having the right amount of capital at exactly the right moment. Whether you’re looking to upgrade your online platforms, expand into new locations, or simply stock enough inventory to keep up with peak demand, a retail business loan from the Small Business Administration (SBA) could make all the difference.

Backed by federal guarantees, SBA loans offer retailers competitive rates, flexible repayment terms, and the ability to use funds for anything from inventory to store renovations. This financial backing can give you the ability to confidently invest in growth, more effectively manage seasonal swings, and take advantage of opportunities that come your way.

How to use SBA loans to tackle your biggest retail needs.

There are several different types of SBA loans for retail business, with options designed to address different priorities, timelines, and funding amounts. Here are a few ways you can use this versatility to your advantage.

Get flexible funding with SBA 7(a) loans.

With loan amounts up to $5 million and repayment terms extending to 25 years for real estate purchases, SBA 7(a) loans allow retailers to fund a broad range of needs. This can range from working capital and equipment purchases to refinancing certain debts or even acquiring another business, offering a significant advantage to retailers balancing multiple priorities.

Speed up inventory purchases with SBA Express loans.

When you spot a hot-selling product or need to stock up quickly for an unexpected surge in demand, waiting months for loan approval isn't an option. SBA Express Loans cap at $500,000 but offer much faster processing. They’re often approved within 36 hours. While interest rates are often slightly higher than some other SBA loans, they can be an excellent option for time-sensitive financing needs.

Build your retail presence with SBA 504 loans.

If you’re looking to purchase a storefront, warehouse, or major equipment, an SBA 504 Loan may be your best option. Specifically designed for real estate and fixed asset purchases or improvement, this loan option offers low interest rates and long repayment terms. Many retailers use 504 loans to enhance their customer experience and increase operational efficiency.

Start small with SBA Microloans.

SBA Microloans are often an excellent option for retailers with smaller funding needs. They make it easy to secure up to $50,000 with more relaxed qualification requirements. These loans also come with business counseling and support, making them ideal for first-time business owners or retailers expanding into new product lines.

What SBA lenders want to see in your retail loan application.

When applying for an SBA loan, it’s important to show the lender that you understand the factors that drive your business and have a clear plan for using the funding effectively. For retailers, a strong application highlights:

• Strong inventory turnover ratios: Show that your products move consistently and that you have systems in place to avoid overstock or stockouts.
• Proven location performance: Include foot traffic data, nearby business activity, and demographics that show your store’s potential.
• Integrated sales channels: Demonstrate how your e-commerce and in-store operations work together to reach more customers and drive year-round revenue.
• Realistic financial projections: Include seasonal variations in your cash flow forecasts. Lenders appreciate applicants who acknowledge slow months rather than projecting steady growth year-round.
• Solid management experience: Having a strong personal background or an experienced management team can make a big impact.
• Emergency cash reserves: Show that you have a backup plan (such as a credit line or cash reserves) to cover slow periods or unexpected expenses.

You don’t need to have every item in place to qualify, but the more of these items you can present, the stronger your application will be.

Turn your SBA loan into better inventory management.

Using retail loans for inventory financing allows you to maintain optimal stock levels without tying up your cash. To optimize this, set up automatic reorders based on sales velocity and use funds to take advantage of bulk purchase discounts during off-peak seasons. Just be sure to track your inventory turnover monthly to ensure loan payments align with actual sales cycles.

Put SBA financing to work for your next expansion.

Expanding your footprint can create exciting opportunities, but many retailers underestimate the time needed to reach profitable sales levels after opening the doors. To protect your investment, secure a small business loan before signing a lease and add a 3-to-6-month payment buffer into the loan amount. This will help cover expenses during the construction and initial ramp-up periods.

Invest in e-commerce and digital growth with SBA funding.

Many retailers use SBA loans to upgrade their online presence. This may include investing in features like an updated POS system, an improved online store, or mobile payment integration. Focus on choosing tech investments that directly increase sales or reduce operational costs, and treat them as long-term assets, matching repayment schedules to the returns they’re expected to generate.

Avoid these common SBA loan mistakes.

Even savvy retailers can sometimes make mistakes with their SBA loans. These three pitfalls typically cause the most problems:

• Over-leveraging during peak seasons: Don't assume holiday sales will cover excessive borrowing. Use conservative projections and keep emergency reserves for slower months.
• Inadequate cash flow planning: Map out your entire year, including seasonal dips. Plan for loan payments you can cover in your lowest revenue months, not your best ones.‍
• Inventory mismanagement: Track purchases and sales closely. Failing to maintain accurate inventory records may lead to noncompliance with SBA loan terms.

Create lasting retail success with your SBA loan.

When managed well, SBA loans can help retailers build sustainable, profitable businesses. To improve your chances of success, align the funds with a solid growth strategy, stay ahead of payment schedules, and stay compliant with program requirements.

Ready to explore SBA financing for your retail business? Lendio connects you with lenders who understand the industry and can help you find the right funding solution. Check your eligibility to get started.

So, you’ve been approved for a small business loan—congratulations! You can now use that loan for the things you need, whether that’s expansion, new acquisitions, equipment financing, or bridging cash flow gaps.

But getting SBA approval is just the beginning. You’ll also need to plan ahead for cash flow deficits, keep up with compliance and reporting obligations, and manage your SBA loan funds effectively so your company can continue to grow and thrive with minimal financial risk.

Payment management and financial discipline.

A crucial part of SBA loan management is prioritizing loan repayment. After all, falling behind could negatively impact your finances and make it harder to qualify for future loans.

Here are some ways to ensure you keep up with payments.

• Set up automatic payments to avoid late fees—This is generally best if you have consistent cash flow and can guarantee sufficient funds in your account when payment comes due.
• Budget in loan payments—Add a separate category in your budget to ensure you don’t fall behind.
• Cut down on other expenses—If funds are tight, seek ways to reduce other expenses as needed to prioritize the loan.
• Pay more than the minimum when possible—If you have extra cash flow, put it toward your loan to pay it down faster (but check for a prepayment penalty first).
• Avoid taking on new debts—Managing an SBA loan is much easier when you don’t have additional debts to worry about.
• Pay down other debts—If you’re juggling several loans, look for ways to pay debts with higher interest rates or shorter terms to free up cash.
• Understand your payment schedule and terms—Review the loan details so you don’t get blindsided by irregular repayment due dates, high or variable interest rates, or fees.

Cash flow planning.

As a small business owner, you might experience periods of inconsistent or even negative cash flow. Planning ahead can help keep your financials on track and ensure you never fall behind on loan payments.

You can do this by:

• Creating payment calendars aligned with business cycles—This makes it easier to plan for upcoming expenses, revenues, and cash flow gaps.
• Building payment reserves—These can keep you going strong during slower months.
• Monitoring your debt-service coverage ratio (DSCR)—This shows lenders that your company can repay its debts (shoot for a DSCR of 1.00 or above).
• Tracking your cash flow—This will give you a better understanding of your company’s current liquidity, financial obligations, potential shortfalls, and future cash flow trends.

Need some extra guidance on cash flow? Check out Lendio's in-depth guide on cash flow management.

Consequences of payment issues.

Before taking on a small business loan, know that there are consequences to falling behind on payments. While the SBA offers temporary debt relief to some borrowers, not everyone qualifies.

Missing even one payment could put your loan in “delinquent” status. The lender may contact you requesting payment. In the meantime, interest and possible late fees will still accrue.

Left unpaid, your SBA loan will go into default—usually within a few months of that initial missed payment. At this point, a few things could happen:

• Late or missed payments can affect your business—and sometimes personal—credit score, making it harder to qualify for future financing.
• The lender could attempt to take any collateral associated with the loan (including business equipment or real estate) to recoup the financial loss.
• If you signed a personal guarantee, the lender may also seize personal assets like bank funds or your home.
• If your business or personal assets don’t fully cover the unpaid debt, the lender may request that the SBA pays the remaining amount (up to the government-insured percentage).
• Defaulting could trigger the acceleration clause (making you responsible for repaying the remaining balance plus interest all at once).
• The lender may continue to pursue repayment through a lien or wage garnishment.

If you’re starting to worry about falling behind on payments, reach out to your lender right away about your options.

Compliance and record-keeping.

Certain SBA loan programs have continuing compliance requirements. Here's how to maintain compliance while managing your SBA loan post-funding:

• Review the loan agreement for ongoing compliance or record-keeping requirements.
• Keep accurate documentation of SBA forms and certification (including SBA form 1050, which verifies loan proceeds were disbursed as intended).
• Keep clear records of your business's financials, operations, and fund usage in case of future review or audit.
• Stay on top of payments.

Lender relationship management.

It helps to keep the lines of communication open with your lender and, in the case of the SBA 504 program, Certified Development Company(CDC). Through proactive communication with your lender, you could potentially:

• Get ahead of potential issues before they arise.
• Work through challenges like past-due payments related to temporary cash flow issues.
• Restructure your loan terms to help manage payments.
• Discuss other solutions like debt refinancing, debt consolidation, or forbearance.
• Build a lasting borrower-lender relationship.

Planning and risk management.

As a small business owner, it’s important to plan for the unexpected. You can do this by:

• Monitoring your business’s real-time performance compared to its projections using KPIs, profit margins, cash flow, and other key metrics, alongside financial goals.
• Getting the right business insurance (ex. general liability insurance or commercial property insurance) to protect your firm against lawsuits, natural disasters, and accidents beyond your control.
• Building cash flow reserves to protect yourself against financial risk and economic downturn.

Find the right lender for your business.

Successful SBA loan management means knowing how you’re going to use—and repay—the funds. It also means understanding the risks and doing what’s needed to maintain compliance and set yourself up for success.

Part of this means finding a lender willing to work with you through the ups and downs of business ownership. If you’re thinking about getting financing for your small business, apply now through Lendio’s marketplace. We’ll help you find the right partner and solution for your needs.

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Owning your business space can be a smart step if you're looking for more control and stability. Not least because property ownership often brings with it more predictable costs and the freedom to shape a space around your needs.

But making the leap from renting to buying isn’t always straightforward. Many traditional loans often require large upfront payments, and that kind of financial pressure can make purchasing feel out of reach when you're trying to keep cash flow steady.

That’s the dilemma many business owners face. Let's say you're selling furniture online, and you have outgrown your leased space. Maybe the rent’s climbing too, and your hands are tied when it comes to renovations because the landlord won't allow them.

Buying might start to look like the smarter move, but with rising expenses and tight margins, that upfront cost feels impossible to justify.

SBA loans offer a more accessible path by giving small businesses the support to invest confidently and plan for long-term growth without putting their cash flow at risk.

The two most common are the 504 loan program and the 7(a) loan program, but which suits your needs best will depend on what you're hoping to finance. So, here’s what sets them apart, and how to know which one might be right for you.

SBA 504 loans.

The SBA 504 loan is explicitly designed to help small businesses finance the purchase or improvement of major fixed assets, such as:

• Buildings
• Land
• Large machinery

This program is unique because it brings together three partners:

• Your business
• A conventional bank or credit union
• A Certified Development Company (CDC) (which is a nonprofit organization backed by the SBA)

Together, they share the financing:

• The bank usually covers 50% of the loan
• The CDC typically contributes 40%
• Your business puts down the remaining 10% (though newer businesses or special-use properties may need to contribute a little more)

What makes the SBA 504 loan appealing.

One of the clearest advantages of the 504 loan is its lower down payment. Compared to a traditional commercial loan, the upfront costs are more manageable for many business owners. On top of that, most 504 loans come with fixed, long-term interest rates, so your monthly payments are easier to plan for.

What to consider before applying.

That said, the 504 loan isn’t built for every situation. You can’t use the funds for working capital, inventory, or to refinance debt. Also, because it involves multiple lenders, the approval process can take a bit longer and feel more complex compared to the 7(a) loan.

SBA 7(a) Loans.

If your business has a range of funding needs (not just real estate), then the SBA 7(a) loan might be a better fit because you can use it to buy or refinance commercial property, invest in equipment, cover working capital, or even acquire another business. It’s also a flexible option for making renovations or improving a leased space.

In terms of structure, the 7(a) loan allows you to borrow up to $5 million, with terms of up to 25 years for real estate. It's also worth noting that interest rates can be fixed or variable depending on the lender.

What makes the SBA 7(a) loan appealing.

This loan tends to move a little faster than the 504 process, and it’s often easier for younger businesses to qualify. The flexibility also gives you room to invest beyond property if that’s what your business needs.

What to consider before applying.

The trade-off is that variable interest rates can make your monthly costs harder to predict. Also, down payments and fees vary quite a bit between lenders, which can affect the total cost of the loan.

A note on personal risk.

When weighing up SBA 504 vs 7(a), it's worth thinking about the personal risk involved with each loan:

SBA 7(a) loans generally require a personal guarantee from anyone who owns 20% or more of the business. For larger loan amounts, lenders may secure the loan with collateral using all available business assets, and if that’s not enough, they might also require personal collateral like real estate. That can be a deal-breaker for some borrowers.

SBA 504 loans, by contrast, are usually secured by the property or equipment being financed. They typically don't involve placing a lien on your personal residence, which can be an important distinction if you're concerned about protecting your personal assets.

SBA 504 loan vs. 7(a) loan.

Both the SBA 504 loan and 7a loan are great financing solutions for small businesses, but they’re not created equal. Your particular business status and goals will dictate the ideal choice for your particular business. 

Compared to the SBA 504 loan, the SBA 7(a) loan is far more flexible. You can use it to fund real estate, working capital, inventory, supplies, equipment, and more. The SBA 504 loan, however, is fairly specific and designed to help small business owners purchase, lease, renovate, or improve commercial real estate, buildings, or equipment.

If you’re in need of working capital to purchase inventory or supplies or would like to fill cash flow gaps, for example, the SBA 7(a) loan is an excellent option. This is particularly true if you have collateral to provide and are looking for a faster application process. 

The SBA 504 loan, on the other hand, makes more sense if you’d like to finance real estate, buildings, or equipment and can prove you meet job creation, job retention, or public policy goals. You should also expect a slower application process.

Here is a direct comparison of SBA 504 loan vs. SBA 7(a) loan features, uses and requirements to help you make your decision.

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How to choose between an SBA 7(a) vs. 504 loan.

Choosing between an SBA 504 and a 7(a) loan boils down to your specific business needs, the nature of your project, and your long-term financial strategy. If your primary goal is to secure working capital, refinance business debt, or cover operational expenses, an SBA 7(a) loan offers the flexibility and versatility to support a wide range of business purposes. Its potentially larger loan amounts and the possibility to cover soft costs make it suitable for businesses seeking a more all-encompassing financial solution.

On the other hand, if your objective is to invest in fixed assets such as real estate or heavy equipment, an SBA 504 loan could be the better choice. With its low down payment requirements, fixed interest rates, and long-term repayment options, it's designed to make sizable capital investments more affordable. Additionally, the SBA 504 loan fosters community development and encourages long-term economic growth, providing not just financial but also societal benefits.

Ultimately, the decision should be informed by a thorough analysis of your financial situation, growth forecasts, and how the loan’s terms align with your business's cash flow and investment plans. Consulting with a financial advisor or a lending specialist can provide insights tailored to your specific circumstances, enabling you to make a well-informed choice between these two SBA loan options.

Do you qualify for an SBA commercial real estate loan?

Although SBA loans make it easier for small businesses to finance commercial property, there are still key eligibility requirements to meet. In general, you'll need to:

• Be a for-profit business based in the U.S. and operating in an eligible industry
• Use the property as your primary place of business (at least 51% owner-occupied)
• Demonstrate that you can repay the loan through strong financials, or if you're just getting started, a solid business plan

At this point, it's worth mentioning that lenders typically prefer businesses that have been operating for at least two years. However, that doesn't mean that newer ventures are automatically ruled out. If your plan is well-supported and you can show financial viability, you may still qualify.

You’ll also need to provide documentation as part of the application process, including recent tax returns, financial statements, and details about the property. Most lenders will also require personal guarantees from each business owner.

Business property financing that works for your organization.

So, if you want the stability of owning your long-term business premises, SBA real estate loans can help make it possible. As we've seen, the right choice depends on your goals and how you plan to grow, but no matter your path, Lendio is ready to help you move forward. Compare loan options and start your application through Lendio’s SBA loan marketplace today.

Starting a small business is expensive. Almost every small business owner faces startup expenses, whether you’re a solopreneur needing a laptop or a construction company purchasing a lot full of heavy machinery. Inventory and equipment must be bought, employees or contractors must be paid, and rent comes due every month.

What’s harder, outside funding is often difficult to access when your company is young, but in need of capital. Startup business loans are a great way to bridge this funding gap—and even if you have a suboptimal credit score, there are forms of financing you can probably still access.

Best startup business loans for bad credit with easy approval.

The following list highlights lenders from our selection of best business loans that offer minimum credit requirements of 650 or below and a minimum time in business requirement of six months or less.

Additional lenders to consider

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Small business loan options for startups with bad credit.

If you’re starting a business with a lower credit score, there are several loan routes you can take. 

Service providers

As embedded financing unlocks new ways for business service providers and platforms to service their customers, financing options are now available in places you already frequent. From accounting software to e-commerce platforms, many tools you already use to run your business may offer access to capital directly within their interface—often with faster approvals and tailored options based on your business data.

SBA loans

While the SBA 7(a) and SBA 504 loan programs were created for established businesses, the SBA does offer two startup loans.

1. Microloans

The Small Business Administration's (SBA) microloan program is designed specifically to assist small businesses, start-ups, and nonprofit child care centers. This program offers loans up to $50,000, with the average loan being around $13,000. The funds can be used for various purposes including working capital, inventory, supplies, and machinery or equipment. However, microloans cannot be used to pay off existing debts or purchase real estate.

To qualify for an SBA Microloan, the borrower must meet certain criteria:

• Credit history - The borrower's credit history is reviewed. While there isn't a minimum credit score requirement, a good credit history can improve the chances of approval.
• Collateral - Depending on the loan amount, the borrower may have to provide collateral to secure the loan.

Remember, the SBA doesn’t provide the loan itself, but instead, it works with approved intermediary lenders to offer these loans.

2. Community Advantage 7(a) Loans

The Community Advantage (CA) program (now under the SBA 7(a) program) is another offering by the SBA, aimed at promoting economic growth in underserved markets. Community Advantage Small Business Lending Companies (SBLCs) can provide up to $350,000 in funding. These funds can be used for a range of business activities, including startup costs, expansion of an existing business, and working capital.

To qualify for a Community Advantage loan, certain criteria must be met:

• Credit history - Similar to the SBA Microloan, the borrower's credit history is assessed. While no specific minimum credit score is set, borrowers with a good credit history typically have a higher chance of approval.
• Collateral - Depending on the loan amount, collateral might be required to secure the loan. The specifics regarding collateral are determined on a case-by-case basis.
• Location - The business must be located in an approved underserved market. These included businesses located in Low-to-Moderate Income communities, Empowerment Zones and Enterprise Communities, Historically Underutilized Business Zones, Promise Zones, Opportunity Zones, and rural areas. Additionally, each lender is authorized to work within a certain state or group of states.
• Demographics: Underserved markets also include newer businesses in operation for less than two years, businesses that are at least 51% owned by veterans, or businesses with at least 50% low-income workers.

Remember, as with the SBA Microloan program, the SBA does not provide the loan directly. Instead, it works with approved SBLCs to provide Community Advantage loans.

Online lenders

In the realm of bad credit business loans, online lenders often emerge as a viable option for startups. These lenders provide a variety of financing options, many of which are designed with lenient credit requirements, specifically catering to business owners with bad credit. While online lenders also offer SBA loans and term loans with more stringent credit requirements, they also offer alternative forms of financing.

Business Lines of Credit

Many online lenders provide business lines of credit that allow businesses to draw funds up to a maximum limit as needed. Similar to a credit card, you only pay interest on the amount you use, making it a flexible financing option.

Invoice Financing

Online lenders often offer invoice financing, allowing businesses to borrow against their outstanding invoices. This can provide immediate cash flow while waiting for customers to pay.

Revenue-based financing

A revenue-based financing, sometimes called a business or merchant cash advance, is an upfront sum of cash in exchange for a slice of future sales. This can be a beneficial option for businesses with strong sales but poor credit.

Equipment Financing

Equipment financing is offered in the form of a term loan or equipment lease for the purchase of qualified equipment. Since the equipment serves as partial collateral for the loan, equipment funders often have less stringent credit score requirements.

CDFIs

Community Development Financial Institutions, or CDFIs, are private financial entities that are primarily dedicated to delivering responsible, affordable lending to aid low-income, low-wealth, and other disadvantaged communities. CDFIs play a significant role in generating economic growth and opportunity in some of the nation's most distressed communities. They can offer an array of financial products and services, including business loans, to help underserved communities join the economic mainstream.

CDFIs are found across the United States, and you can locate one near you by visiting the CDFI Fund's Award Database. This database provides information about CDFIs that have received financial awards or recognition from the U.S. Department of the Treasury.

In terms of requirements to work with CDFIs to get a business loan, it varies across different institutions. However, typical requirements may include a business plan, financial projections, personal and business credit history, and collateral. Some CDFIs may also require that the business operates in a specific geographic area or serves a particular community. It's recommended to directly contact a CDFI for their specific lending criteria and application process.

How to get a startup business loan with bad credit.

Navigating the world of business financing with poor credit can seem daunting, but it's far from impossible. Let's dive into the steps to get your startup funded, even if your credit score isn't quite up to par.

1. Evaluate your needs - The first step to obtaining a startup business loan is to evaluate your business needs. Understand how much money you need and what you will use it for. This clarity will help you determine the type of loan appropriate for your business.

2. Research your options - Research various loan options available for startups. Each type of loan has its own eligibility criteria and terms, including minimum credit score requirements. Compare those requirements to your current credit score to see if you may qualify.

3. Prepare your business plan - Lenders generally require a comprehensive business plan. This should include an overview of your business, details about your products or services, market analysis, organizational structure, and financial projections.

4. Gather required documentation - Gather all required documents such as financial statements, tax returns, and legal documents. The specific documents required will vary by lender, so make sure to check with them directly.

5. Apply for the loan - Once you have all the necessary documents and a complete business plan, apply for the loan. This process varies depending on the lender. It could be online or in-person.

Alternate forms of financing

In addition to a small business loan, there are alternate forms of financing that can be explored if you have a lower credit score.

Crowdfunding

Crowdfunding platforms like Kickstarter or Indiegogo allow you to raise capital through small contributions from a large number of people. This form of financing is often used by startups looking to launch new products or services, and it also offers an opportunity to validate your business idea in the market.

Venture capital

Venture capitalists invest in startups with high growth potential in exchange for equity in the company. These investments are high-risk but can provide substantial funds for your business, with the bonus of gaining experienced partners who can offer strategic advice.

Grants

Business grants are sums of money awarded by government departments, foundations, trusts, and corporations to help businesses get started or grow. The great advantage of a grant is that it doesn't need to be repaid. On the downside, competition can be intense, and the application process can be time-consuming.

Business credit cards

You will need a credit score of at least 650 to qualify for a business credit card, but if you meet that minimum requirement, a business credit card is a great way to bolster your credit even further while covering smaller, short-term expenses.

Personal loan

In some circumstances, you may qualify for a personal loan with a poor credit score. While this may not be the most ideal option, it could provide you with the funds you need to get your business off the ground. Just make sure to carefully consider the terms and interest rates before making a decision.

For Porters Bar, a family-run neighborhood spot, the summertime off-season meant slow months and ongoing bills. “We’d end up going into debt, and paying it back would take all season, so we couldn’t build up a pile of savings,” says owner Scott Nogueira.

After several traditional lenders, including his bank of 17 years, turned down his request for small business financing, Scott turned to Lendio. According to Scott, the loan he received “totally saved my business.” With access to the financing they needed, Porters Bar was positioned for growth, setting the stage to surpass $1 million in annual revenue.

Stories like this are familiar to many business owners. Finding reliable, affordable funding for everyday expenses is often one of the toughest parts of running a business. An SBA working capital loan may help bridge the gap between income and expenses, giving you room to manage daily operations without losing focus on your long-term goals.

Working capital loans support daily business operations.

The term “working capital” refers to the funds businesses use to cover operational expenses. This often includes items such as payroll, inventory, rent, utilities, and payments to suppliers.

Unlike long-term financing, which is often used for investments such as equipment or expansion projects, working capital loans typically have short- to medium-term repayment periods. They are designed to bridge the gap between costs and revenue, helping to keep businesses running smoothly from week to week.

SBA working capital loans are backed by the U.S. Small Business Administration. This lowers the risk for lenders, often resulting in lower interest rates, longer repayment terms, and higher approval rates when compared with traditional loans. The SBA guarantee may also improve approval odds for businesses that do not qualify for financing through conventional channels.

Choose the right SBA loan program for your working capital needs.

While there are several different types of SBA loans, only a few are well-suited for working capital needs. The right option depends on several factors, such as how quickly you need the funds, the amount of capital needed, and whether you have one-time or ongoing needs. Here are a few programs to consider.

SBA 7(a) Loans

The SBA 7(a) loan is the most flexible option and is also the most commonly used. Funds may be used for a wide range of purposes, including working capital, inventory purchases, and refinancing certain types of debt.

Loans are available for amounts ranging from $350,000 to $5 million, and when used for working capital, repayment terms can extend for up to 10 years. While rates are negotiated between the borrower and the lender, they must fall within SBA guidelines and are typically lower than conventional loan rates.

SBA Express Loans

SBA Express loans offer faster turnaround times, with decisions typically made within 36 to 48 hours. These loans are designed for smaller, time-sensitive needs.

Loan amounts cap at $500,000, with repayment terms similar to the standard 7(a). Interest rates may be slightly higher, but the application process is more streamlined, with fewer documentation requirements.

SBA CAPLines (Lines of Credit)

The SBA CAPLines program offers four specialized lines of credit for small business owners. The first three are suited specifically for seasonal, contract, and construction businesses, while the fourth is a general-purpose line of credit for day-to-day business operations.

Unlike loans, lines of credit allow you to draw funds only when needed, up to a maximum approved balance. Due to the added flexibility, CAPLines may have slightly higher interest rates when compared to other types of SBA loans.

Common uses for SBA working capital loans.

When incoming revenue can’t keep up with expenses, many business owners turn to a working capital loan to help cover critical costs and avoid disruptions. Common uses include:

• Payroll: Ensuring employees are paid on time and keeping the business fully staffed, even during slower periods.
• Vendor payments: Covering the costs of necessary inventory and avoiding late payments, protecting supply chains and vendor relationships.
• Marketing and promotions: Funding short-term campaigns to boost visibility and drive sales, particularly during the off-season.
• Fixed operating expenses: Managing rent, utilities, and other fixed costs that continue regardless of business cycles.
• Covering accounts receivable gaps: Smoothing over delays in payment or billing cycles that create cash flow disruptions.

While these are some of the most frequent uses, you can use working capital loans to address nearly any operational expenses that affect your daily cash flow.

Unique advantages of SBA working capital loans.

Government backing gives SBA working capital loans several advantages that traditional financing typically can’t match. They often come with lower interest rates and longer repayment periods, giving you more time to stabilize monthly cash flow without the added pressure of aggressive payment schedules. You'll also have the flexibility to use the proceeds for virtually any operating expense, making them well-suited to a range of industries and needs.

SBA loan programs are designed to improve access to funding for underserved groups, such as minorities, women, and veterans. This may result in greater access to cash flow solutions, even for those who were previously denied a loan with a conventional lender.

Eligibility criteria for SBA working capital loans.

To qualify for an SBA working capital loan, you must own a for-profit business based in the United States. The business must also meet the SBA’s size standards, which typically include having fewer than 500 employees.

While there’s no universal SBA loan credit score requirement, most lenders prefer businesses with strong credit. However, SBA Express Loans and CAPLines may allow for slightly lower scores. Generally, lenders prefer applicants with at least one to two years in business, though startups with strong business plans or secured contracts may also be able to secure funding.

It’s critical to show consistent revenue and demonstrate an ability to repay the loan. One way lenders evaluate this is through your current ratio, which measures whether your current assets are sufficient to cover your current liabilities. It's calculated by dividing current assets by current liabilities, with a ratio above 1.0 generally being considered a sign of good short-term financial health. In some cases, SBA loan approval may require you to make a personal guarantee or put up collateral, especially for higher loan amounts.

How to successfully apply for an SBA working capital loan.  

A bit of preparation can go a long way toward strengthening your SBA loan application and expediting the approval process. Start by organizing your financial documents, including:

• Recent personal and business tax returns
• Profit and loss statements
• Balance sheets

Be prepared to clearly explain how you'll use the funds and how they'll benefit your operations or support growth. Vague requests can raise red flags, while detailed, thoughtful plans increase lender confidence.

Keep in mind that transparency builds trust. If your business has experienced revenue dips or faces seasonal challenges, explain these patterns and present a realistic recovery plan. Lenders appreciate honesty and want to see that you understand your business cycles.

Finally, explore multiple lenders before committing to a loan offer. Each lender may take a different approach to evaluating your application based on their specific criteria. Applying for an SBA working capital loan through a marketplace like Lendio may increase your chances of finding the right lender and loan terms for your needs. Check your eligibility today.

You might consider an SBA microloan if you’re trying to start or expand a small business.

But how exactly does getting a microloan through the SBA work? What do you need to meet the requirements? What do terms look like? How do you get started with an application?

We’ll answer  all these questions in more in our guide to SBA microloans. We’ll explain how it all works, highlighting requirements, current interest rates, microloan lenders, alternatives, and how you can apply today.

What is an SBA microloan?

The SBA microloan program consists of small loans funded by the Small Business Administration. However, these loans don't come directly from the SBA to the borrower. Instead, the SBA provides the funds to a network of intermediary lenders, such as community based nonprofit lenders.

This network then provides microloans to eligible small businesses and certain childcare centers. Participants in the nonprofit lender network are selected not only for their experience in lending, but in management and technical assistance as well, so that these intermediaries can administer the microloan program effectively.

SBA microloans provide financing to traditionally underserved businesses, such as startups, women-owned companies, and minority-owned businesses.

Eligible businesses can borrow up to $50,000, but according to the SBA, the average microloan is around $13,000.

What can SBA microloans be used for?

Microloans can be used for many purposes, affording small businesses flexibility when needing to rebuild, re-open, repair, or improve their business.

Seeking an SBA microloan might be a solution if you are looking to:

• Access working capital
• Purchase or replenish inventory or supplies
• Replace or purchase furniture or fixtures in your business
• Purchase new machinery, or secure equipment upgrades

However, you can not use an SBA microloan to pay existing debts, settlements of lawsuits, trade disputes, fines or penalties, or purchase real estate. You also can’t use the SBA microloan for personal, non-business use.

SBA microloan requirements

The SBA microloan loan program is geared for early-stage businesses and startups, but all for-profit small businesses and certain nonprofit childcare centers are eligible.

Because SBA microloans target early-stage businesses and underserved business segments, the requirements for qualification are less stringent than other types of traditional loans. Even if you have limited credit history or lower income, you may qualify.

Of course, each intermediary lender will have its own eligibility requirements, but most will ask for some or all of the following:

• Collateral and/or a personal guarantee from the business owner
• Minimum credit score - 620 or higher is good to have, but intermediary lenders may accept lower scores
• Owner’s Personal finance history
• Business finance history, with current cash flow or cash flow projections
• A certain location within the lenders geographic service area
• A minimum amount of time in business

SBA microloan rates, fees and repayment terms.

Although the SBA places certain restrictions on intermediary lenders, such as not exceeding $50,000 in loan amounts, interest rates and fees are up to your specific lender.

The interest rates will vary depending on your lender, but they typically range between 8% and 13%. And repayments terms are available for up to seven years.

SBA microloans also cannot be made as a line of credit - the microloan is structured as a term loan.

Pros and cons of SBA microloans

Pros

• Easier to qualify for: If you’re a startup or don’t have much business history, it can be hard to qualify for a business loan. Microloans, on the other hand, come with less stringent requirements, having been built to provide financing to businesses that traditionally struggle to find funding. 
• Faster funding: If you apply for a traditional SBA loan, the application and funding process can take months to complete. In comparison, you could receive funding through your microloan in just 30 days. 
• Low interest rates: Like all SBA loans, microloans come with low interest rates. The rates will vary depending on your lender, but the average rate is between 8% and 13%.
• Flexible loan terms: SBA microloans come with repayment terms of up to 7 years, so your monthly payments are more affordable. 

Cons

• Small loan amounts: If you need to borrow more than $50,000, the microloan program might not be the best option for you. 
• Spending restrictions: SBA microloans do come with certain spending restrictions. For instance, you can’t use the funds to pay down existing debt or purchase real estate. 
• Lenders may charge fees: The SBA caps its fees, but individual lenders can charge their own fees. For instance, you may have to pay an application fee, loan processing fee, or closing costs.
• Availability is limited: Since SBA microloans are offered by nonprofit intermediary lenders, these loans can be harder to find. These lenders don’t have the resources and staff that larger lenders have, so these loans might not be available in your area.

Finding SBA Microloan Lenders

The SBA has hundreds of lending partners located across the country, and provides a comprehensive list of microloan lenders to help you find a match. 

Most lenders will require you to either speak to a lending specialist over the phone or apply in person. 

The lender you work with will inform you about any necessary paperwork and documentation to apply. In addition, some lenders may require that you complete a workshop or training program as part of the application process. 

As part of your paperwork, you’ll need to provide a range of information, including:

• Proof of identity
• Description of collateral
• Balance sheet data (income and expenses)
• Personal and business tax records
• Business details (industry, licensing, assets, leases, etc.)

Once you’ve submitted all the required paperwork, your application is complete, and your lender will review and process the loan.

Alternatives to SBA microloans

If you’re not sure if an SBA microloan is the right fit for your business, here are some alternatives to consider:

• SBA 7(a) loans: SBA 7(a) loans are a good choice for businesses that need larger loan amounts. These loans are available for up to $5 million, but the qualification criteria are more strict. 
• Business credit cards: A business credit card can be used for any business purchase, and the application process is relatively easy. If you go this route, look for a card with an introductory 0% APR. 
• Invoice factoring: If you have a lot of cash tied up in your unpaid invoices, invoice financing allows you to leverage your outstanding invoices to get access to capital. 

The bottom line

SBA microloans can help startups and small businesses access the capital they need. These loans are a good option for traditionally underserved borrowers, like women and minorities, or low-income community businesses. If you’re interested in exploring your loan options, you can use Lendio to quickly compare loan offers from multiple lenders.