Working Capital Loan Requirements
A Knowledgeable Guide on What Lenders Look For and How You Can Get Approval | 7 mins Read
Written by
RiseFineX Team
Reviewed by
Roy
📌 Summary
- Know the key eligibility factors: time in business, revenue, and credit score.
- See how revenue and business age affect your loan options.
- Understand credit score requirements for different lender types.
- Prepare key documents like bank statements, business plan, and licenses.
- Learn how debt, collateral, and industry impact your loan terms.
Introduciton
Securing a working capital loan can be a critical step for small business owners looking to bridge short-term financial gaps, stabilize operations, or take advantage of time-sensitive opportunities. However, lenders follow a set of established criteria when evaluating applicants. Knowing these requirements not only helps increase your chances of approval but also helps you select the right lender and loan product for your specific needs.
Time in Business
One of the fundamental metrics lenders use to assess risk is how long your business has been operational. Longevity signals stability and sustainability.- Minimum 6 months: Accepted by many alternative or online lenders
- 1–2 years: Standard requirement for traditional banks or SBA-backed lenders
Monthly or Annual Revenue
Lenders need assurance that your business generates enough income to repay the loan. They’ll evaluate your financial performance based on:- Monthly revenue: Most lenders expect at least $5,000–$10,000
- Annual revenue: Typically $100,000+ for traditional or SBA lenders
Credit Score
Your personal and business credit scores offer lenders insight into your financial responsibility. While credit isn’t always the deciding factor, it does affect loan terms and approval likelihood.- 680+: Ideal for traditional loans or low-interest financing
- 600–679: Acceptable for many online lenders
- Below 600: May still qualify for merchant cash advances or invoice financing
Business Bank Account
Lenders require a business checking account for multiple reasons:- To confirm cash inflow and outflow
- To facilitate ACH withdrawals for repayments
Business Plan or Use of Funds
Especially with banks or SBA loans, lenders often request a clear outline of how you plan to use the loan. This can be presented in a formal business plan or a simple loan proposal that includes:- Business objectives
- Revenue model and projected income
- Specific uses for the loan (e.g., equipment, inventory, payroll)
Outstanding Debt or Obligations
Lenders assess your current liabilities to determine your ability to take on additional debt. Too much existing debt increases your financial risk and may lower your eligibility or loan amount.- Existing loans or cash advances
- Credit card balances
- Monthly lease, rent, or equipment payments
Collateral (Sometimes Required)
While many working capital loans are unsecured, some lenders may require collateral—especially if the loan amount is high or your credit is poor.- Secured loans: Backed by physical assets like equipment, property, or receivables
- Unsecured loans: Higher interest rates but no assets required
Industry Type
Lenders often have preferred and restricted industries. High-risk sectors may be automatically disqualified by some lenders. < >Commonly restricted industries:- Gambling or casinos
- Adult entertainment
- Firearms and weapons
Legal Entity & Business License
You’ll need to provide documents proving your business is registered and compliant with state and federal laws.- EIN (Employer Identification Number)
- Business registration (LLC, corporation, etc.)
- Active business licenses or permits
Documentation Checklist
To speed up the loan process, prepare the following:- Government-issued ID (passport, driver’s license)
- Business bank statements (last 3–6 months)
- Recent tax returns (especially for banks)
- Voided business check
- Proof of business registration
Final Thoughts: Prepare to Improve Approval Odds
Applying for a working capital loan becomes more straightforward when you understand what lenders are evaluating. Start by improving your credit score, stabilizing your revenue streams, and ensuring all your documents are in order. Remember, different lenders have different requirements. While traditional banks may have strict criteria, fintech and online lenders offer more flexible solutions. Compare terms carefully, avoid predatory lending, and only borrow what your business can repay without stress.Need help choosing the right loan? Check out our full guide to Working Capital Loans for Small Business for a breakdown of types, pros and cons, and where to apply.
