Commercial loan criteria.

1. Business Information

• Business Structure: Legal entity (LLC, corporation, sole proprietorship, etc.).

• Years in Operation: Most lenders prefer businesses with at least 2–3 years of operating history.

• Industry: Risk level of the business’s industry (e.g., restaurants may be riskier than professional services).

• Purpose of the Loan: Specific use case (e.g., working capital, real estate, equipment purchase).

  
  

2. Financials

• Revenue: Consistent cash flow and annual revenue are crucial. Some lenders set minimum revenue thresholds.

• Profitability: Net profit margins and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

• Debt Service Coverage Ratio (DSCR): Determines the business's ability to cover loan payments. A DSCR of 1.25 or higher is generally preferred.

• Current Debt: Assessment of existing loans and obligations.

  
  

3. Collateral

• Asset Valuation: Real estate, equipment, or inventory offered as security.

• Loan-to-Value Ratio (LTV): Maximum LTV for secured loans ranges from 50%–90%, depending on the asset type.

  
  

4. Creditworthiness

• Personal Credit Score: For small business owners, personal scores are often reviewed (usually 650+ for many loans).

• Business Credit Score: Lenders assess scores like Paydex or SBSS for established businesses.

• Credit History: Review of past loans, defaults, or bankruptcies.

  
  

5. Documentation

Common documentation requirements include:

• Financial Statements: Balance sheets, income statements, and cash flow statements (past 2–3 years).

• Tax Returns: Both business and personal tax returns for 2–3 years.

• Bank Statements: Business accounts for the past 3–12 months.

• Debt Schedule: List of current liabilities.

• Business Plan: Including projections and growth strategies.

• Ownership and Legal Documents: Articles of incorporation, operating agreements, and licenses.

  
  

6. Loan Type and Size

• Loan Amount Requested: Must align with the business’s financial profile and needs.

• Type of Loan: Term loans, SBA loans, equipment loans, or lines of credit. Each type has specific requirements.

  
  

7. Risk Analysis

• Economic Conditions: Macroeconomic trends affecting the business sector.

• Management Team: Experience and track record of the business owners and leadership team.

Go to our Loan Criteria for specifics.