How to Get a Business Loan: A Step-by-Step Guide for New Businesses

Securing a business loan isn’t just about filling out generic forms—it’s about presenting a clear, organized picture of your business. Think of a lender less like a strict gatekeeper and more like a potential partner evaluating your business history, financial stability, and documentation to determine whether you’re a reliable borrower. Ultimately, those who get funded the fastest are the ones who show up with their paperwork organized and ready to go. 

This guide breaks down the lending process so you know what to expect: the common types of financing available, what lenders generally look for, the key documents you will need to have, and how to submit a strong, well-organized.

Key takeaways 

• Most lenders will look at both of your personal credit and business credit scores as part of the loan approval process.

• SBA loans, traditional lenders, and online lenders each have different eligibility requirements, interest rates, and funding timelines.

• Strong financial documents and a clear business plan can meaningfully support an application.

• Organized documentation tends to reduce delays and build lender confidence throughout the process.

More than 70,000 loans totaling $31.1 billion opens in a new tab were approved by the SBA in Fiscal Year 2024.

What lenders and banks look for in small business applications

At its core, qualifying for a business loan comes down to proving three simple things: you have steady revenue coming in, your existing debt is under control, and you have a clear plan to pay the money back. 

For newer businesses, personal credit carries more weight since there aren't years of track records to look at for your new business. For established businesses, lenders weigh annual revenue, cash flow, time in business, and collateral (like equipment, inventory, or property). The stronger the financial profile, the more doors that are open to you, though where you apply matters too, with small bank applicants having a 54% full-approval rate opens in a new tab, compared to significantly lower rates at large banks.

SBA-backed loans, traditional bank loans, and online lenders each have distinct qualification standards, so understanding the landscape before applying is worth the effort.

Types of business loans

Not all business loans are created equal. The right financing option depends on your unique business situation. 

The right financing options for you depend on a few key factors like:

Business Age: How long the business has been operating

Credit History: The strength of its credit profile

Timing: How quickly funding is needed

Business Goal: What the funds will be used for

Understanding the main categories of business financing and how they differ can help narrow down which option is the most appropriate fit for a given business's stage and circumstances.

SBA loans vs. traditional bank loans

When you start looking at formal business funding, you will quickly find two major paths: government-backed loans and traditional bank loans.

1. SBA-Backed Loans 

SBA loans are backed by the Small Business Administration (SBA), a federal agency that partially guarantees loans made through approved lenders. Because the government reduces the lender's risk, SBA-backed loans typically offer:

• More competitive interest rates than conventional financing

• Lower down payments

• More accessible eligibility requirements for small businesses

The scale of the program reflects its reach: in Fiscal Year 2024, the SBA approved more than 70,000 loans totaling $31.1 billion opens in a new tab—the highest loan count in over 15 years, representing a 22% increase in volume over the prior year.

2. Traditional Bank Loans

Traditional bank loans are issued directly by banks or credit unions without a government guarantee. They often come with stricter eligibility requirements around credit scores, annual revenue, and time in business.

However, if you run an established business with a strong, proven financial track record, traditional bank loans can be a fantastic, highly reliable option to secure major capital.

Private and alternative lenders

Outside of banks and SBA programs, businesses can also pursue financing through private lenders and alternative lending channels. While these are sometimes grouped together, they serve slightly different purposes.

Private lenders,such as non-bank financial institutions, specialty finance companies, and individual investors, typically offer more flexible qualification criteria than traditional banks. They may be a viable route for businesses that:

• Don't meet conventional lending standards

• Need financing structures that banks don't typically offer

• Are seeking more tailored lending arrangements

Alternative lenders, which include online lending platforms and fintech companies, generally prioritize speed and accessibility. Key characteristics include:

• Shorter approval timelines

• Less stringent eligibility requirements

• Application processes conducted entirely through an online account

The tradeoff for both is cost. Interest rates are typically higher than those available through traditional or SBA-backed loans, repayment terms may be shorter, and some agreements include prepayment penalties worth reviewing before accepting any offer.

Eligibility requirements for business loans

Business loan requirements vary significantly depending on the lender type and loan program. Generally speaking, lenders evaluate both the financial health of the business and the personal financial profile of its owner or owners. Meeting the minimum thresholds in each area doesn't guarantee approval, but falling short in one area can affect the terms offered or the likelihood of success.

Credit score and personal financial requirements

For many small business loans (particularly those sought by newer businesses), personal credit plays a significant role in the lender's assessment. Key considerations typically include:

• Personal credit score: Many lenders look for a FICO score of 680 or above, though requirements vary by lender and loan type

• Personal credit history: A clean record of managing existing debt and making payments on time strengthens an application

• Debt-to-income ratio: Lenders may assess personal financial obligations alongside business ones, particularly where the two are closely tied

For businesses with bad credit or a limited credit history, some financing options remain available—though they often come with higher interest rates or stricter collateral requirements.

Business financial requirements

Beyond personal credit, lenders typically assess the financial standing of the business itself:

• Annual revenue: Most lenders set minimum revenue thresholds, which vary by loan type and lender

• Time in business: Many traditional lenders prefer at least two years of operating history, though SBA loan programs and alternative lenders may work with newer businesses

• Cash flow consistency: lenders look for evidence that the business generates enough cash flow to comfortably cover repayments

• Business credit scores: Established businesses are often assessed on their business credit profile separately from the owner's personal credit

Because requirements differ so significantly across lender types, eligibility thresholds can vary considerably depending on where a business chooses to apply. SBA loans, traditional bank loans, and alternative lenders each approach credit scores, revenue, time in business, and collateral differently, so understanding those differences upfront can help businesses identify the most suitable path forward.

Essential documents you'll need for your loan

Incomplete or disorganized documentation is one of the most common reasons business loan applications are delayed. In fact, a massive study by the Federal Reserve showed that unclear or weak financial records are the leading cause of loan denials, driving approximately 68% of denials opens in a new tab. Lenders use your financial and legal records to answer three basic questions: Are you operating legitimately? Do you actually own the business?Is the business safe to lend you money?

The quality and completeness of what's submitted can meaningfully impact your application: It doesn't just improve the chances of your credit approval decision but dramatically speeds up how fast the bank deposits the cash into your account.

Financial documentation

Lenders typically request a combination of historical and forward-looking financial records, including:

• Business and personal tax returns: usually covering the past two to three years

• Profit and loss statements: to assess revenue trends and operational costs

• Balance sheets: providing a snapshot of business assets and outstanding balance obligations

• Cash flow projections: particularly important for newer businesses or those with inconsistent revenue

• Bank statements: typically the most recent three to six months

For newer businesses with limited financial history, personal credit and personal financial documents often carry additional weight in the lender's assessment.

Legal and business documentation

Alongside financial records, lenders generally require documentation that confirms the legal standing and structure of the business:

• Business licenses and permits confirming the business is authorized to operate

• Formation documents, such as articles of incorporation or organization

• Operating agreements, particularly relevant for LLCs and limited liability partnerships

• Ownership documentation verifying the identity and ownership share of each business owner

• Business plan outlining operations, revenue projections, and growth strategy

• Use-of-funds statement explaining how the loan amount will be deployed

Managing these documents across multiple stakeholders like lenders, legal teams, and financial institutions is where disorganization tends to create the most friction. Keeping agreements and formation documents secure, accessible, and properly signed from the outset supports a smoother process.

With your documents in order and your loan type identified, there's one more foundational step to address before submitting an application—and it's one that catches a lot of businesses off guard.

How to open a business bank account

Most lenders require a dedicated business bank account to already be in place, both as a condition of lending and as a key part of how they verify your financial history. Opening a business bank account is straightforward, but the documents required often mirror what lenders will later ask for, which makes it a useful exercise in getting organised early.

Banks typically require:

• EIN (Employer Identification Number): the federal tax identification number assigned to the business

• Articles of Organization or Incorporation: confirming the legal formation of the business

• Business license: evidence that the business is authorized to operate in its jurisdiction

• Operating agreement or business resolution: particularly relevant for LLCs and limited liability partnerships

Personal identification documents: government-issued ID for each owner or authorized signatory Banks are also required to verify the identity of business owners and authorized signatories as part of standard Know Your Customer (KYC) compliance. This typically involves confirming the identity of each person with ownership or signing authority, documenting anyone holding a significant ownership stake, and running standard fraud prevention checks on all new business accounts.

How to apply for a business loan

The strength of a loan application often comes down to preparation. Lenders are assessing risk, and a well-organized, accurate, and consistent application signals that a business is being run with the same care and attention they'll want to see in a borrower.

Before submitting, lenders generally expect financial documents to be current, consistent, and clearly presented. Areas that commonly require attention include:

• Aligning financial statements: profit and loss statements, balance sheets, and tax returns should tell a consistent story about the business's financial position

• Addressing financial gaps proactively: if cash flow has been inconsistent or revenue has dipped in a recent period, having a clear explanation ready can help manage lender concerns

Supporting documentation: bank statements and any additional records that corroborate the financial picture should be organized and readily available

For newer businesses in particular, a business plan often carries significant weight in the lender's assessment. A well-constructed plan typically covers:

• Revenue projections: Realistic, clearly supported forecasts that reflect the business's growth trajectory

• Operational plans: an overview of how the business functions day-to-day and how it intends to scale

• Use-of-funds explanation: a clear account of how the loan amount will be deployed and how it supports the business purpose

• Growth strategy: context around market opportunity, competitive positioning, and long-term direction

Lenders are looking for evidence that the business has a credible path to generating the revenue needed to repay the loan. A business plan that addresses this directly, rather than relying on optimistic projections alone, tends to hold up better under scrutiny.

The business loan application process

Timelines and requirements vary by lender, but the general sequence from application to funding follows a broadly similar path across most business financing programs.

What to expect during underwriting

Underwriting is the process by which lenders formally assess the risk of extending credit to a business. During this stage, lenders typically:

• Review financial documents: Tax returns, profit and loss statements, balance sheets, and bank statements are assessed for accuracy and consistency

• Run credit checks: Both personal credit scores and business credit scores are commonly reviewed during this stage

• Assess collateral: For secured loans, lenders evaluate business assets, commercial real estate, equipment, or other collateral offered against the loan amount

• Request additional information: It is not uncommon for lenders to follow up with requests for supporting documentation or clarification on specific line items

Underwriting timelines vary considerably. SBA loans tend to take longer, given the additional government-backed approval requirements, while alternative lenders often move through this stage significantly faster.

Closing and funding

Once underwriting is complete and credit approval has been granted, the loan moves to closing. This stage typically involves:

• Final loan agreement review: Borrowers receive the full terms of the loan, including the interest rate, annual percentage rate, repayment schedule, and any prepayment penalties

• Signing loan documentation: All parties sign the formal loan agreement before funds are released

• Funding and disbursement: Once signed, funds are typically disbursed to the business bank account, though timelines vary by lender and loan type

For many small businesses, the closing stage is where disorganized documentation causes last-minute delays. Agreements involving multiple stakeholders, like lenders, legal teams, and business owners, benefit from a clear and secure process for managing signatures and finalizing paperwork.

Tips for increasing your business loan approval odds

While no single factor guarantees a green light, think of your loan application as a puzzle. Lenders look at your credit, revenue, and documentation together to see how well the pieces fit.

While no single factor guarantees a green light, think of your loan application as a puzzle. Lenders look at your credit, revenue, and documentation together to see how well the pieces fit

If you want to put your absolute strongest application forward, these are the five areas worth focusing on:

 1. Your Credit Health (Personal and Business)

Both personal credit scores and business credit scores factor into most lending decisions. Addressing any outstanding issues before applying can improve the terms available

2. Clean, Real-Time Financials 

Lenders respond well to applications where financial documents are current, consistent, and clearly presented

3. Steady, Reliable Cash Flow 

Businesses that can demonstrate steady revenue over time present a lower risk profile than those with highly variable income

4. Manageable Existing Debt 

A high outstanding balance or significant debt obligations can affect both eligibility and the loan amount a lender is willing to extend.

5. The Right Lender for Your Growth Stage 

Newer businesses may find more success with SBA loan programs or alternative lenders, while established businesses with strong credit may be better positioned for traditional bank financing

Staying organized throughout the business funding process

Securing business financing is rarely a one-time event. As a business grows, its financing needs evolve—and treating documentation as an ongoing priority rather than a pre-application task reduces friction at every stage.

Applying for a business loan often involves managing sensitive financial records, legal agreements, and banking documentation across multiple stakeholders. See how Docusign helps small businesses securely sign, organize, and manage important agreements throughout the funding and onboarding process.

FAQs

Can a startup get a business loan with no revenue?

Options are more limited for businesses without an established revenue history, but they do exist. Some lenders assess startup applications based on personal credit, collateral, or a well-constructed business plan rather than trading history. SBA microloans and certain alternative lenders may also work with early-stage businesses that don't yet meet the revenue thresholds required by traditional bank loans.

What is the difference between a business loan and a business line of credit?

A business loan provides a lump sum that is repaid over a fixed term, making it well-suited to specific, defined purposes such as equipment purchases or leasehold improvements. A business line of credit works more like a revolving facility — the borrower draws funds as needed up to an approved limit and repays only what has been used. Lines of credit are typically used for working capital and managing cash flow rather than one-time expenses.

Does applying for a business loan affect personal credit?

In many cases, yes. Most lenders run a credit check as part of the application process, which can result in a hard inquiry on the applicant's personal credit report. For newer businesses without an established business credit profile, personal credit often plays a significant role in the lender's overall assessment.

This guide is offered for general information purposes only. It does not constitute, and is not a substitute for, legal advice.