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Many funding options are available for small businesses, and the amount of revenue you need to qualify for each is different. The bare minimum annual revenue for funding from a traditional lender, like a bank, is $100,000, though most lenders set higher requirements.
If you don’t have that much revenue, you still have options, including alternative lenders, with some accepting an annual revenue as low as $33,000 to $50,000.
A wide variety of funding options are available for small businesses, but eligibility factors vary by lender, loan type and what you will use it for. Looking at business loans based on your business’s revenue will point you toward the options available.
The very lowest a lender will require for a conventional business loan is about $100,000 in yearly revenue. But most lenders require higher annual revenue.
Consider each option available to you and the revenue you need to qualify to find the business funding option that works for your business.
Here are some typical revenue requirements broken down by loan type.
While there are several factors that lenders consider when you apply for a loan (like business credit), revenue is an important one.
Your revenue is the amount of income your business makes. A lender needs to see that you can pay back the loan. The more consistent revenue the business has, the more likely it is to make timely payments on a business loan.
If a business is a startup that hasn’t yet made revenue or has low revenue, the lender will see the investment as high-risk. This makes them much less likely to give you a loan and more likely to give you high interest rates if they do. Conversely, you can get lower interest rates on your loan with higher revenue because the lender feels you are less risky.
If your annual revenue is below the lender’s requirement, collateral or a personal guarantee may lower the lender’s risk and, as a result, help you secure funding.
Gross revenue is one important factor for commercial lenders, but they also want to see how much money the business owes compared to how much it makes.
Using the debt-service coverage ratio (DSCR), which measures a business’s ability to cover all its outstanding debts with its income, lenders can decide if the business can afford the loan payment. Typically, commercial lenders want to see a DSCR of 1.25 or higher before giving the business a loan, but that doesn’t mean there aren’t ways to improve your DSCR if it’s too low.
If you don’t have the revenue to qualify for a business loan, you may still be able to get one by doing the following:
This strategy won’t always work, though. If you can’t find a lender who will work with you on a startup loan, you may need to consider other types of business loan options, including equipment financing, invoice financing or microloans.
With equipment financing, annual revenue is less of a concern because the loan is secured by the equipment, which lowers the lender’s risk and ensures they can recoup the cost of the loan using the collateral.
Invoice financing is a loan secured through a lender, but approval is largely based on the money owed to the business by its customers, not just its credit or annual revenue.
Similar to invoice factoring, the business receives a percentage of the invoices in one lump sum. But the invoices are paid by customers directly to the business, and the business can then repay the lender.
Microloans are small business loans of no more than $50,000 and are typically reserved for businesses with low annual revenue operating in underserved communities. SBA microloans, for example, are designed for startup businesses, but the lending requirements are up to the lender.
Traditional lenders will likely require the business to have revenue to give you a term loan. But there are unconventional funding options if you need cash for your business but haven’t started bringing in revenue yet.
Showing that your business can make money helps convince lenders to give you a loan. You also need to know your DSCR to show that your business will be able to make payments. Before talking to a lender about getting a business loan, make sure you know your DSCR and total revenue for the last two years.
There are other business funding options if you don’t yet have revenue. Don’t give up if you don’t qualify for any business loans. Explore your options to find other options that will work for your business.
How much can you borrow with a startup business loan?
What credit score do I need for a business loan?
How much can you borrow with a business loan?
How hard is it to get a business loan?
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
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