This sort of loan is designated for people who already have a working and thriving business but may need some extra cash towards working capital, business improvements, renovations, new technology and more. In order to qualify for business funding, you need to meet certain conditions. Unlike with startup business grants or startup business loans, you will already need to have some form of established cash flow.
You must have a credit score between 500 and 800.
The presence of cash flow.
In order for a lender to approve your loan, they are going to have to see that your business is profitable. They will also look at your expenses to understand whether this business is feasible. Depending on your gross earnings, you can typically receive a loan equal to 50 to 70% of your monthly turnover. The interest rate you get depends on your credit score. In order to apply for business funding, it is necessary to provide your monthly statements for the last 3-6 months.
There are also conditions
(not having to do with the specific business you are applying for) that can indirectly affect your eligibility. For example, if you have declared bankruptcy in the last 7 years, the number of loans issued and the general condition of your industry.
Low DTI ratio.
Lenders want to see a debt to income ratio under 40%. This ratio means that you are using 40% (or less) of your profits to pay off your debts.
How long you’ve been in operation.
For this specific loan, lenders will not want you to be in the process of opening up shop. Lenders want to see that you’ve been in business for at least 6 months.
A balance sheet / business plan
to show lenders that you are organized and financially prepared. A balance sheet shows the internal finances of your business and can be used to evaluate your eligibility.