Business Funding Requirements

Business Funding Requirements: What You Need to Qualify

Understanding what lenders look for helps you prepare before applying and choose the right funding products for your situation. Requirements vary significantly by funding type, but certain factors are universally important.

Universal Qualification Factors

The Four Pillars of Funding Approval

Every lender evaluates some combination of these core factors:

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Requirements by Funding Type

Merchant Cash Advance Requirements

MCAs have the most lenient requirements, focusing on cash flow over credit.

Key MCA Qualifications:

• ●Daily bank deposits showing consistent revenue
• ●No recent bankruptcies (within 12 months)
• ●Active business bank account
• ●Valid business license

What Disqualifies You:

• ●Very new businesses (under 4 months)
• ●Recent bankruptcy
• ●Multiple existing MCAs at high utilization
• ●Excessive NSF/overdrafts in bank statements

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Business Line of Credit Requirements

Online/Alternative Lenders:

Traditional Banks:

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Term Loan Requirements

Short-Term Online Loans:

Traditional Bank Term Loans:

SBA Loans:

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Invoice Factoring Requirements

Invoice factoring focuses on your customers' creditworthiness more than yours.

What Makes Invoices Factorable:

• ●Clear, undisputed amounts
• ●Creditworthy customers (the factor checks their credit)
• ●Standard payment terms
• ●No liens or prior pledges
• ●Delivered goods/services

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Equipment Financing Requirements

Equipment serves as its own collateral, making qualification easier.

Equipment Categories and Requirements:

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Detailed Requirement Breakdown

Time in Business

Why it matters and how lenders view it:

What Counts as "Time in Business":

• ●Date of business registration/formation
• ●OR date of first significant revenue
• ●Some lenders count industry experience

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Revenue Requirements

Revenue demonstrates your ability to repay:

How Revenue Is Verified:

• ●Bank statement deposits (most common)
• ●Tax returns (banks, SBA)
• ●Financial statements (larger loans)
• ●Processing statements (card-based businesses)

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Credit Score Requirements

Credit requirements vary dramatically by product:

Which Credit Score Is Used?

• ●Personal credit (FICO) for most small business loans
• ●Business credit (D&B, Experian Business) for larger/established businesses
• ●Most lenders check both

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Cash Flow Requirements

Lenders analyze bank statements for cash flow health:

Debt Service Coverage Ratio (DSCR):

Banks require proof you can afford new payments:

DSCR = Net Operating Income ÷ Total Debt Service

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Industry-Specific Requirements

Some industries face additional requirements:

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Improving Your Qualifications

Short-Term Improvements (30-90 Days)

Medium-Term Improvements (3-12 Months)

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Pre-Qualification Checklist

Before applying, assess your position:

Basic Qualifications

• ● Business is registered/licensed
• ● Have dedicated business bank account
• ● Can provide 3-6 months bank statements
• ● Know your personal credit score
• ● Have calculated monthly revenue

Product-Specific Readiness

For MCA/Revenue-Based:

• ● 4+ months in business
• ● $10,000+ monthly deposits
• ● Clean recent bank statements

For Online Term Loans:

• ● 12+ months in business
• ● $100,000+ annual revenue
• ● 600+ credit score

For Bank Products:

• ● 2+ years in business
• ● 680+ credit score
• ● Profitability documented
• ● Tax returns available

For SBA Loans:

• ● 2+ years in business
• ● 680+ credit score
• ● Complete financial records
• ● Business plan available

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Summary: Know Before You Apply

Understanding requirements helps you:

1. ●Target the right products for your current situation
2. ●Prepare effectively before applying
3. ●Set realistic expectations for amounts and terms
4. ●Identify improvement areas for future applications

Quick Reference:

The goal is matching your current qualifications with the right products while building toward better options over time.