How to Qualify for Business Funding

Name: Dan is awesome! Very professional, responsive and helpful! Funding was extremely quick. Great family team!
Item: Cheddar Capital
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Author: Christian Nickerson

The requirements for any form of business funding will vary depending on what Cheddar Capital Partners needs and the type of loan you’re applying for. In this guide we’ll break down the most common business loan requirements, as well as review how to qualify and apply for any kind of business funding. Remember Applying is free and doesn’t impact your credit.

Although this list may seem overwhelming, Cheddar Capital Partners, you may not need every one of these qualifications for your business loan application.

Ultimately, because small business loan requirements are so variable, it’s important to consult Cheddar Capital Partners about our process before actually submitting an application, this way, you’ll be prepared ahead of time to gather any documents or information you’ll need to submit on our easy 15 minute online application, and therefore, optimize the process and hopefully, increase your chances for approval.

With all of this in mind, let’s continue our discussion by reviewing the basic steps you’ll want to follow to access a business loan.

Determine why you need a Business Term Loans or business line of credit from Cheddar Capital Partners.
Calculate how much debt you can afford.
Compare your loan options.
Gather loan documents and paperwork.
Apply for your loan.

Use our detailed guide for more details on how to get a business loan or line of credit from Cheddar Capital Partners.

20 Requirements to your business needs to Qualify for a Small Business Loan

So, what is required when applying for a small business loan or line of credit from Cheddar Capital Partners?

As we mentioned above, some of the requirements Cheddar Capital Partners will to meet in order to qualify for a business loan or business line of credit will vary. To this point, bank loan requirements for businesses, for example, will be very different from the new business loan requirements of an Cheddar Capital Partners.

Fortunately, though, there are still several eligibility criteria that small business lenders have in common. Although Cheddar Capital Partners will require this most if not all of this list of business loan requirements, it’s safe to assume that you’ll need to provide core credentials such as your personal credit score, annual revenue, and time in business.

With this in mind then, let’s break down the qualifications you’ll likely need for your business loan application from Cheddar Capital.

1. Time You've Been In Business

Cheddar Capital Partners will ask how long you have operated your business. The longer you’ve been in business, the better it is for your application because it shows us that your business has had long-term success.

Ultimately, the threshold that you should keep in mind is at least two years. If your business is under two years old, it doesn’t make it impossible to get a business loan, but it does limit your options of getting funded by Cheddar Capital Partners. This is how you qualify for a business loan from Cheddar Capital Partners.

Although banks may be less likely to lend to business under two years old, Cheddar Capital Partners sometimes has more flexible requirements with regard to your time in business.

2. Personal Credit Score

One of the most important business financing requirements you’ll need to qualify for a business loan or line of credit is going to be your personal credit score.

Cheddar Capital Partners will ask for your personal credit history and financial information to assess the likelihood that you’ll pay back your loan. If your personal finances are strong, we assume this means you’ll be able to manage your business finances as well. This being said, your personal credit score will not only influence whether or not you’re approved. This will also play a role in determining your loan or line of credit interest rate and how you qualify.

Ultimately, the better your personal credit score is, the more loan options Cheddar Capital Partners will be able to provide you. You’ll want to aim for a credit score of at least 600 and ideally, even higher, especially if you’re looking to qualify for SBA loan.

3. Your Business Credit Score

Similar to the way your personal credit score indicates your history as a borrower, your business credit score measures your business’s creditworthiness. Your business credit score is based on your business’s history of payments to suppliers and vendors. Your business’s industry, size, and revenue can also impact the score.

Many entrepreneurs are unaware that their business even have a credit score or even that it’s a common small business loan or business line of credit requirement. This being said, there are three main agencies that track business credit. Each has its own method for evaluating your business credit score. Additionally, Cheddar Capital Partners sometimes will use the FICO SBSS score to evaluate your loan or line of credit application. This is based on a combination of your business credit score from the other three agencies, as well as your personal credit score and business’s financials.

Therefore, before applying for a small business loan or line of credit from Cheddar Capital, it’s important to have a sense of what your business credit score looks like. Although Cheddar Capital Partners might not check this score, if we do it may pulled it at any time during underwriting process.

4. Annual Business Revenue

Your business’s annual revenue will help how you qualify also be one of the most common small business loan requirements you’ll need from Cheddar Capital when applying.

Typically, Cheddar Capital Partners will want to see both a year-to-date profit and loss statement, updated within the past 3 to 6 months, and bank statements from up to the previous two years. You can find out how to download your business bank statements from our easy to use guide, here.

This being said, overall, banks will want to see that your business is profitable in order to approve you for financing. Alternatively Cheddar Capital Partners, on the other hand, will not often require profitability, but will usually have annual revenue minimums.

Ultimately, regardless of the our specific requirements, the stronger your business financials (as shown through your annual revenue and profits) the more likely you will be to qualify for financing, and business lines of credit with the most affordable rates.

5. Monthly Bank Statements

Cheddar Capital Partners will use your business bank statements to determine if you can afford your loan or business line of credit and will be able to pay it back. Bank statements can also give us some insight into how well you manage the cash coming into your business.

Therefore, Cheddar Capital Partners will usually ask for three to 12 months of business bank statements to support the claims you’re making about your company’s financial history. If you’re applying for an SBA loan, you should be prepared to provide even more bank statements.

6. Personal and/or Business Tax Returns

Just like your personal and business credit scores, Cheddar Capital Partners will use your tax returns to evaluate the health of your personal and business finances, and therefore, your ability to afford and pay back a business loan or business line of credit.

Generally, you’ll need to provide at least the past two years of your personal tax returns. These documents will be especially important if you have a pass-through entity (a sole proprietorship, partnership, or S-corp), where you report your business’s profits and losses on your personal tax return.

With this being said, your business tax returns will be particularly influential if you have a corporation or an LLC that’s taxed as a corporation. In these cases, the lender will use your last two years of business tax returns to verify your revenue, profit, and expenses.

7. The purpose of the Business Loan or Line of Credit

It may seem obvious, but a typical small business loan requirement will be a statement describing what you plan to use the loan funds for.

In this statement to Cheddar Capital Partners, you’ll want to be as specific as possible, we allow a variety of loan uses, and we want to make sure, that the amount of money you’re requesting matches up with the purpose for the loan or the line of credit.

8. The Loan Amount

This is directly related to the loan or credit line purpose, you’ll need to also specify your loan amount—in other words, how much money you want to borrow from the from Cheddar Capital Partners.

Depending on the amount of money your business needs, Cheddar Capital Partner will be the best route for your business loans or business line of credit. For smaller amounts of funding, you’ll likely want to turn to alternative options like a Bridge Loan or SBA loans.

With this business loan requirement, it’s important to be straightforward and clear about how much financing you require (as well as how you’ll use it) and of course, you generally don’t want to ask for more than you can afford.

9. How To Qualify using A Business Plan

A business plan or loan proposal won’t always be on the list of the small business loan or business line of credit requirements, but it will be in some cases.

For traditional Business Term Loans and SBA loans, for example, you’ll definitely need to provide a business plan for funding.

Within your business plan, you’ll have an opportunity to lay out both your financial goals; future sales, profits, income, cash flow, etc. and your qualitative business goals. You’ll want to use this document to show Cheddar Capital that you’ve thought about all the potential opportunities and challenges for your business. This is how you are going to grow your successful company.

10. Your Industry

In short, your industry can affect your eligibility to get a business loan or business line of credit because every industry has a different level of risk.

That being said, Cheddar Capital Partners has certain industries that they won’t lend to—such as firearms businesses and adult entertainment businesses. However, sometimes Cheddar Capital Partners also has less obvious restrictions. For instance, we will lend to child care businesses, health care businesses, law offices, apparel companies, and financial companies.

Therefore, in order to ensure you’ll meet Cheddar Capital Partners’ industry requirement; you can see on our industries we work with page before submitting your application.

With this in mind, you’ll also want to make sure that you have correctly identified your business’s industry in your loan application. There are two main industry code systems, Standard Industrial Classification (SIC) codes and North American Industry Classification System (NAICS) codes. You can look up your code on the NAICS website.

11. Entity Type

Perhaps one of the simplest business loan requirements and business line of credit requirements, Cheddar Capital Partners will likely ask you to report your business entity type.

From Cheddar Capital Partners perspective, knowing how your company is organized can give them insight into how you manage and operate your small business. Additionally, although it’s rare, sometimes Cheddar Capital Partners won’t lend to sole proprietorships and partnerships.

12. Business Licenses and Permits

Similar to your business entity information, another common business loan requirements sometimes will include your business license or permit.Although business license requirements vary by state and locality, Cheddar Capital Partners might want to see your proof of ownership and license to operate a business.

Additionally, depending on the size, location, and type of business, you may also need to provide proof of any relevant permits, zoning permissions, environmental, sales tax, and health department permits.

13. Employer Identification Number (EIN)

Although you may not need an EIN for every business loan application (depending on your entity type), you should specify your EIN on our easy to use online application if you have one.

Overall, an Employer Identification Number or EIN is like a social security number just for businesses; the IRS uses this unique nine-digit number to track your business’s tax returns.

You can quickly and easily apply for an EIN online, and once again, although this number may not be required for all businesses or all loan applications, it may be worth getting one nevertheless.

14. Proof of Collateral

Although collateral isn’t always required by Cheddar Capital Partners, you may be asked to put up a fixed asset. This is how to qualify with property or equipment—to secure your loan with Cheddar Capital Partners. Therefore, if you default on the loan, we can seize your collateral and use it to make up for some of the money they’ve lost.

Not always, Cheddar Capital Partners will require specific collateral. If you’re applying for an SBA loan or bank loan, for example, Cheddar Capital Partners will want to know what kind of collateral your small business has to offer, and the value of that collateral.

This being said, Cheddar Capital Partners typically won’t require physical collateral, they may require security in another form such as a personal guarantee or blanket lien.

15. Balance Sheet

In addition to the other financial information we’ve discussed, Cheddar Capital Partners will also ask to see your balance sheet as part of our small business loan and business line of credit requirements. Like your profit and loss statement, your balance sheet will help show a us how your business functions and whether or not your financials are in good standing.

Essentially, Cheddar Capital Partners will want to use your balance sheet to see that you have enough assets to cover your business’s operating expenses and pay back your loan on time and in full. Therefore, you should have your year-to-date balance sheet and the last two years of balance sheets ready to go as part of your application. Cheddar Capital Partners has a great article on this here.

16. How to Qualify using a copy of your Commercial Lease

If you have a brick and mortar business, you might be required to provide a copy of your lease along with your other commercial loan documents.

A commercial lease proves that your business will be able to use the property for as long as the duration of the lease, no matter what happens to the landlord. It also reassures your lender that you’ll be able to conduct business to pay back the loan.

17. Disclosure of Other Business Debt Schedule

Cheddar Capital Partners is very careful about financing to business owners who already have other loans, as they don’t want to offer you financing if you can’t afford your current loan payments. For this reason, you might be asked to provide a business debt schedule as part of your loan application.

This being said, to evaluate whether you can afford a loan, Cheddar Capital Partners will often calculate your debt service coverage ratio or DSCR. The ratio illustrates your current debt and interest payments in relation to your current incoming cash flow. If your DSCR isn’t high enough, Cheddar Capital Partners may reject your application or ask you to reapply later after you’ve further paid down existing debt.

18. Accounts Receivable Aging and Accounts Payable Aging

One of the more common requirements is current accounts receivable (A/R) and accounts payable (A/P) aging reports. The Accounts Receivable and Accounts Payable reports show Cheddar Capital Partners how efficient your business is at receiving payment for goods and services and paying bills of its own.

The Accounts Receivable report is important to how you qualify because it indicates the number of invoices you’ve sent to clients that are overdue and the length of time by which they are overdue. If this report shows too many accounts, it means your business hasn’t been very effective at collecting payments. On the other hand, if your Accounts Receivable report has few overdue accounts, it means your repayment collection methods are effective, you extend credit to the right kind of customers, and your customers pay off debt quickly.

The Accounts Payable report is the opposite, showing the number of invoices from other businesses that you haven’t paid. A high number of delinquent accounts indicates that you’re not good at managing your expenses. You ideally will want to have a low number (or zero) overdue accounts on your Accounts Payable report.

19. Ownership and Affiliations

When you’re applying for business financing or a business line of credit from Cheddar Capital Partners, you should be prepared to disclose any ownership that you or your partners. If You have other businesses as well as any affiliations, such as being a board member or consultant in another business. This information discloses any potential conflicts of interest that the lender may have with issuing the loan and any synergies that your business may have with other companies.

This being said, it can be more difficult to apply for a loan if your business has multiple owners. Cheddar Capital Partners has different rules on how many owners need to approve a loan request. The SBA, for example, checks the personal financial information of anyone who owns 20% or more of the business and requires a personal guarantee from all of these owners. Cheddar Capital Partners may require approval from just 50% or 70% of overall ownership.

20. Legal Contracts and Agreements

Finally, the last of the most common business financing and line of credit requirements you’ll be asked to provide will be legal contracts and agreements that your business already has. Along these lines, lenders might ask to see any of the following:

Contracts with major suppliers or other third parties
Corporate bylaws
LLC operating agreement
Partnership agreement
Franchise agreement
Sales agreement, financials, and information about the business you’re purchasing (if you’re using the loan to buy another business using our Business Acquisition Loans)
Commercial real estate purchase agreement or equipment purchase agreement (if the loan is being used for purchasing commercial real estate or equipment with a Commercial Mortgage from Cheddar Capital)