How to Get a Small Business Loan: Key Lender Considerations When Applying for a Business Loan

Small business loan – what a bank looks for

When applying for a business loan, your lender will take into account a variety of factors before approving your business loan application. Be prepared to answer the following questions when applying for a business loan.

The Business Overview:

Lenders will want to learn everything they can about your business. They will ask a series of questions related to how your business got started, how it is currently performing and what the future holds. Be prepared to tell the story of your business, and come with answers to the following questions:

  • What is the history of your business?
  • What are the strengths and weaknesses of your business? 

Reason for Borrowing: 

Securing a business loan can bedifficult. Lenders are concerned with getting their loan repaid. The reason why you need a business loan will come into play. Come to the table with a plan for how the money will be used, including: 

  • How much is needed and why?
  • Does the reason for borrowing make sense?

Personal Credit:

Credit represents your ability to borrow money with the promise to pay it back. As part of the lending review process, lenders will consider the answers to these questions:

  • What is your personal credit score?
  • Does your credit report contain red flags?

Business Cash Flow:

In addition to your balance sheet and income statement, your lender will want to review your historical and projected cash flow. Successfully managing your cash flow is critical to your business. Sample questions from a lender related to cash flow include:

  • Is there historical positive cash flow?
  • Does your business project positive cash flow?

Business Debt Coverage Ratio:

One of the key lender considerations is your debt service coverage ratio. This is the ratio of cash available for servicing your business debt. Lenders look to this ratio to learn if you can afford to repay the loan. Questions lenders might ask related to debt service include:

  • What debt obligations does your business have?
  • Are they paid on time?
  • After paying all debts, is there any discretionary cash flow?  
  • Can your business repay the loan?

Understanding these key lender considerations is critical in helping prepare for the lending review process. To prepare for a conversation with a lender, ask a friend or fellow business owner to ask you these key questions and provide feedback on your answers. You can also check our event calendar for upcoming “Access to Capital” workshops in your area, where these key questions and other important things to know about preparing to apply for a loan will be covered.

Lender Considerations

About Excelsior Growth Fund

Excelsior Growth Fund (EGF) helps businesses in New Jersey, New York and Pennsylvania grow by providing streamlined access to business loans and advisory services. EGF’s signature product, the EGF SmartLoan™, provides up to $100,000 in fast, transparent, and affordable financing through a secure online platform. Larger loans up to $500,000 are also available. EGF is a nonprofit organization and is certified by U.S. Department of Treasury as a Community Development Financial Institution (CDFI). Learn more