Answer
How hard is it to get a small business loan?
Harder than the advertising suggests and easier than the horror stories. What actually determines the answer for you.
It depends almost entirely on which door you knock on. Bank approval rates for small business applicants have historically run well under half, while online lenders approve the majority of applicants at several times the cost. The binding constraints are cash flow coverage, two years of filed returns, and a credit score above roughly 680.
"Hard" is the wrong frame
Difficulty is not a property of business lending. It is a property of the match between your file and a specific lender's credit box. The same application can be a comfortable approval at one institution and an automatic decline at another, without either being wrong.
So the useful question is not how hard is it, but which lenders lend to businesses that look like mine. That is answerable.
Where you sit determines the answer
| Your profile | Realistic difficulty | Where to start |
|---|---|---|
| 2+ years, profitable, 700+ credit, collateral | Straightforward | Bank or SBA lender |
| 2+ years, profitable, 680+, thin collateral | Very doable | SBA 7(a) |
| 2+ years, breakeven, 660+ | Workable with the right lender | SBA or CDFI |
| 1-2 years, growing, 640+ | Limited but real | Online lenders |
| Under 1 year, any credit | Hard for general lending | Equipment or factoring |
| No revenue yet | Depends on your cash and credit | Startup options |
| Credit under 600 | Narrow, and expensive | CDFIs, factoring |
The things that actually stop applications
In the order underwriters encounter them:
- Coverage below 1.15x. The business does not generate enough to pay the new debt. This decides more files than credit score does.
- Unfiled or extended tax returns. Nothing proceeds. This is the most common avoidable blocker in the entire process.
- Financials that do not tie to the returns. Triggers a reconciliation exercise and a loss of credibility.
- Delinquent federal debt. An absolute blocker for SBA until resolved.
- Undisclosed debt found in the bank statements. Ends files.
- An industry the lender does not touch. Not personal, not negotiable, and easily checked in advance by asking.
What makes it materially easier
- Wait for the second filed tax return if you are close. Two years is the most common hard threshold in the industry.
- Apply during your strong quarter. Lenders underwrite trailing twelve months.
- Retire a high-payment obligation first. It sits in the coverage denominator.
- Bank where you borrow. A deposit relationship is real information a form cannot convey.
- Pick a product that matches your collateral. If you invoice businesses, factoring will approve you when a term loan will not.
- Ask the lender their credit box before applying. Minimum revenue, time in business, score, and excluded industries. Good bankers answer directly and save you weeks.
Questions people actually ask
What percentage of small business loan applications get approved?
It varies enormously by lender type and is reported inconsistently. Large banks have historically approved a minority of small business applicants, small banks rather more, and online lenders the majority -- at several times the cost. Treat any single quoted approval rate with suspicion unless it names the lender type and the year.
Is it easier to get a loan from a bank or online?
Online is easier and considerably more expensive. A bank offers the best pricing and the least appetite for risk. The genuine middle is an SBA-backed loan through a bank: bank-level pricing with a government guarantee that lets the bank say yes to files it would otherwise decline.
How many lenders should I apply to?
Two or three. One is not enough to know whether your terms are fair. Eight stacks hard inquiries and, in the SBA world where lenders talk, makes your file look shopped.