A lender's published minimums are the screen that decides whether anyone reads your application at all. Meet every one of them and you get a real review; miss one and most lenders decline automatically, no matter how strong the rest of your file is. Read them before you apply, measure yourself the way the lender will, and you avoid declines that cost you time and leave hard credit inquiries behind.
The four minimums almost every lender lists
Time in business. Usually stated as months or years. Lenders measure it from a date they can verify: your business registration, the first deposit in your business bank account, or the first tax return filed. If you incorporated two years ago but only started selling 14 months ago, many lenders will count 14 months. Banks commonly want two years. Online lenders and revenue based funders often accept six to twelve months.
Annual revenue, or monthly deposits. Banks read revenue from your tax returns. Online lenders read it from your bank statements, and they mean deposits into your business account, not invoices sent. A $10,000 transfer from your personal savings is not revenue, and neither are loan proceeds or transfers between your own accounts. Lenders strip those out. If a lender says "$15,000 in monthly revenue," it usually means an average of at least that over the last three to six months, with no month far below it.
Credit score. Usually the personal score of each owner with 20% or more of the business, because those owners sign a personal guarantee. Some lenders also pull a business credit report from Dun and Bradstreet, Experian or Equifax. In Canada the personal report comes from Equifax or TransUnion. A stated minimum is a floor, not a target: a lender that says "650 minimum" approves most of its loans well above it.
Loan size. Minimums and maximums both matter. A lender with a $250,000 minimum does not want your $60,000 request, because its costs per loan are the same either way. A lender whose maximum is $500,000 cannot help with a $2 million acquisition. Matching the request to the lender's sweet spot is one of the easiest wins available.
What the numbers are really testing
Each minimum is a stand in for a risk the lender cannot measure directly.
| Minimum | What the lender is really asking | What a bank checks | What an online lender checks |
|---|---|---|---|
| Time in business | Will this business survive the term of the loan? | Two years of filed returns | Age of the bank account and registration |
| Revenue | Is there enough cash flowing to carry a payment? | Revenue and profit on tax returns | Average monthly deposits |
| Credit score | Do the owners pay what they owe? | Full personal and business reports | Score plus recent delinquencies |
| Loan size | Is this deal worth our cost to process? | Fits the bank's lending range | Fits a multiple of monthly revenue |
Once you see it this way, the logic of a decline is clearer. A business with one strong year can still fail the time test, because the lender has no proof the year will repeat.
The minimums that are not on the front page
Published minimums are only the first screen. Read the full requirements or ask a loan officer about these.
- Restricted industries. Most lenders list industries they will not finance or finance only in limited ways. Common ones include cannabis, adult entertainment, firearms, speculative real estate, some trucking and some nonprofit structures. Check before you do anything else.
- Average daily balance and negative days. Online lenders count the days your account ran below zero and look at your average balance. Several overdrafts a month will sink an application that clears every published minimum.
- Existing advances. Many online lenders will not fund a business that already has one or two outstanding merchant cash advances or daily payment loans, or will only fund one that pays them off.
- Location. Some lenders serve only certain states or provinces, and some state licensing rules limit who can lend where.
- Ownership and citizenship. SBA loans have specific ownership and eligibility rules for every owner. Ask early if any owner is not a US citizen or permanent resident.
- Debt service coverage. Banks and SBA lenders calculate whether your cash flow covers all your debt payments, including the new one. The SBA itself requires a minimum coverage ratio on its loans, and most banks want about 1.25. This is often the real minimum, even though it rarely appears on a lender's website.
- Down payment or equity injection. Real estate, acquisition and some equipment financing deals require you to put in cash. SBA acquisitions commonly require about 10% of the project.
How to measure yourself before applying
Do this in an afternoon, before you talk to any lender.
- Write down your verifiable start date. Use the earliest of your registration date and your first business deposit, and know which one each lender will use.
- Pull six months of business bank statements. Add up the deposits, subtract transfers, loans and refunds, and divide by six. That is your number for online lenders. Count negative balance days.
- Pull your last two business tax returns. Note revenue and net income, then add back interest, depreciation and amortization. That is close to the cash flow a bank will start from.
- Check each owner's credit. Know every score and every late payment in the last two years, and be ready to explain them.
- List all current debt. Lender, balance, payment, maturity. Include any advance with a daily or weekly payment. Lenders will find these, so show them first.
- Size the request. A useful rule for short term online products is a request of about one month's revenue or less. For a bank term loan, size it so your coverage ratio stays at 1.25 or better.
What to do when you fall just short
If you miss a minimum narrowly, you have three good options.
Wait. If you are at 20 months and the lender wants 24, four months of clean statements gets you there, and the loan you get then will usually cost less than the one available now.
Change lender type. A CDFI or online lender may accept the file a bank would decline. Asset based options, like invoice factoring or equipment financing, lean more on the asset than on your history.
Change the request. A smaller loan, a shorter term or added collateral can bring an otherwise borderline file inside the lines.
What does not work is applying everywhere at once. Each hard inquiry lowers your score slightly, and several in a short window look like distress. Pick the two or three lenders whose minimums you clearly meet and start there.
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