Business owners often feel lending decisions are a mystery. In practice, most lenders weigh up the same handful of things. Knowing what they are helps you apply at the right time, to the right lender, with the right paperwork.
1. Time trading
Many mainstream lenders want to see at least one or two years of trading. Some specialist lenders will consider businesses from six months, and start-ups have their own options, such as Start Up Loans.
What helps: if you’re newer, apply to lenders whose criteria fit your age, rather than collecting declines from those that won’t consider you.
2. Turnover and profitability
Lenders want to see enough income to cover repayments comfortably. Unsecured lenders often size loans as a proportion of annual turnover.
What helps: up-to-date accounts, and management accounts if your last filed accounts are out of date. If this year is much stronger than last, show it.
3. Bank statements and cash flow
Many lenders now look closely at your recent business bank statements, often via open banking. They’re checking for regular income, how much cash you keep, and warning signs like returned payments or frequent overdraft limit breaches.
What helps: run all business income and spending through the business account, and avoid bounced payments in the months before you apply.
4. Credit history
Lenders check the business’s credit file and, for most small businesses, the directors’ or owners’ personal credit files too. Missed payments, County Court Judgments (CCJs) and high existing debt all count.
What helps: check your own credit reports beforehand and correct any errors. There’s no credit check to start: checking your eligibility with us doesn’t touch your credit file. A lender only checks your credit if you decide to go ahead with an application.
5. Existing borrowing
Lenders look at what you already owe, including loans, cards, cash advances and HMRC payment plans, and whether the new borrowing is affordable on top.
What helps: be upfront. Lenders will find existing debt anyway, and an explanation (for example, “this loan ends in three months”) goes a long way.
And one more: the reason you’re borrowing
A clear purpose such as “a second van to take on a new contract” is easier to lend against than “general cash flow”. If you can show how the funding will pay for itself, say so.
Declined before?
A decline from one lender doesn’t mean every lender will say no. Criteria vary a lot across the market. That’s exactly why we search more than 163 lenders rather than one.