Business loan eligibility: what lenders actually look at

Whether you qualify for business financing, and on what terms, comes down to a few things lenders check repeatedly: how long you have been in business, your revenue, and your credit. Knowing what they weigh helps you target the right product instead of the easiest one to get approved for.

Merchant Cash Advance

Factor rate 1.1–1.5

Priced as a factor rate (repay $1.10-$1.50 per $1 advanced), NOT an APR. Because repayment is fast (often daily/weekly), the effective APR is frequently very high (commonly cited 40%-350%+). Fast and easy to qualify for but among the most expensive financing; the shorter the payback, the higher the effective APR.

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Working Capital / Term Loan

Short- to medium-term financing for everyday operating needs or specific purchases. Rates and terms vary widely by lender, business revenue, time in business, and credit profile; online/alternative lenders are faster but usually cost more than banks. Always compare the total cost and APR, not just the monthly payment.

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SBA 7(a)

Government-guaranteed small-business loan, typically lower cost but slower with stricter eligibility. Most 7(a) loans cap at $5 million (SBA raised the cumulative 7(a)+504 limit to $10M effective July 4, 2026). Rates are tied to a base rate plus an allowed spread (lender maximums roughly ~9.75%-14.75% depending on size/term). Eligibility: for-profit, US-based, creditworthy with ability to repay, generally cannot get reasonable credit elsewhere; lenders often want personal credit ~680+ and a ~10% equity injection.

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This is general information, not financial advice, and we are not a lender. The fastest money is often the most expensive, so the goal is to understand the trade-offs before you sign.

The three things lenders weigh most

Time in business matters because lenders see newer businesses as riskier. Many traditional and SBA lenders prefer a couple of years of history, while some online lenders accept less.

Revenue, and its consistency, shows whether you can repay. Lenders often want to see steady monthly deposits, and some set minimum annual revenue thresholds.

Credit, both personal and business, affects approval and pricing. Stronger credit generally unlocks lower rates and longer terms. Specific thresholds vary by lender, so we leave exact numbers to current data sources.

SBA loans and bank loans

SBA loans are partially guaranteed by the government, which lets lenders offer competitive rates and longer terms. They tend to fit established businesses that can wait, because the application is thorough and funding is slower.

Traditional bank loans can also offer strong terms but usually have stricter requirements around time in business, revenue, and credit.

If you qualify and are not in a rush, these are often the lowest-cost options. The trade-off is paperwork and time, so plan ahead rather than waiting for a cash crunch.

Working capital loans and lines of credit

Working capital loans and business lines of credit fill shorter-term needs like inventory, payroll, or seasonal gaps. Online lenders often fund faster and accept thinner files than banks.

The trade-off is usually a higher rate and a shorter term. A line of credit gives flexibility because you draw only what you need and pay interest on that amount.

These can be reasonable when used deliberately. Match the term to the need, so you are not paying for long-term financing on a short-term expense.

Merchant cash advances and why factor rates are expensive

A merchant cash advance (MCA) is not a loan; it is the purchase of future sales at a discount. You get cash quickly and repay through a slice of daily or weekly receipts.

MCAs are priced with a factor rate rather than an APR. A factor rate is multiplied against the amount advanced to get a fixed payback, so the cost does not drop if you repay early, and the effective annualized cost is often very high.

MCAs are fast and accessible, which is the appeal, but they can be among the most expensive financing available. Use our MCA calculator to estimate the total payback before you accept one, and explore cheaper options first if you can wait.

See business funding options

Connect with a funding provider to check what you qualify for. Compare the total cost and APR, not just the payment.

Disclosure: Some links here are affiliate links: if you connect with a provider through them DebtReliefScout may earn a commission, at no extra cost to you. It never changes what you pay or how we present options. Details.

Frequently asked questions

How long do I need to be in business to qualify?: It varies by product and lender. SBA and bank loans often prefer a couple of years of history, while some online lenders fund newer businesses at higher cost. Confirm the specific requirement with each lender.
Why is a merchant cash advance so expensive?: MCAs use a factor rate, not an APR, so you owe a fixed payback regardless of how fast you repay. Because repayment is often quick, the effective annualized cost can be very high. It is fast money, but rarely cheap money.
Does my personal credit affect a business loan?: Often, yes, especially for smaller or newer businesses. Many lenders check personal credit and may require a personal guarantee. Stronger credit generally means better rates and terms, though exact thresholds differ by lender.