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How To Become An Ideal Candidate For Small Business Lending

Written by: Vanita Lee-Tatum, Executive Contributor

Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.


Over the past 15 years, I've worked with various small businesses, ranging from startups to well-established and expanding enterprises. One thing every small business has in common is the need for access to capital to support and sustain its growth. In this article, I will leverage my experience in small business lending with what I've learned from experts in the field to help you get capital ready!

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In order to establish yourself as an ideal candidate for small business lending, you'll need to understand exactly what lenders are looking for. If your loan requests are not being approved, read on to know the causes and how you can fix them!

Credit History

Credit History ‒ Creditworthiness (or lack thereof) has an impact on lenders' willingness to extend financing to small businesses. Poor credit scores raise a question about your authenticity as a business owner. Late payments, bankruptcy, etc., are key contributors to bad credit ratings. You can improve your credit score by checking your credit report regularly, reporting errors to the credit bureaus, and paying bills on time.

Cash Flow

Cash is King! Cash flow is money coming in and going out of your business. In small companies, positive cash flow is more important than profit, and poor cash flow management is one of the reasons lenders hesitate to trust your company. Hence, focusing on effective strategies for positive cash flow is what you should be aware of. This basic formula for cash flow will give you an idea of what to plan for:

Business Cash Flow = Net Business Income + Depreciation + Interest - Business Distributions - Taxes


Property or assets a business can use as security for a loan are termed collateral in a business. A lack of collateral doesn't qualify your business as an ideal candidate for a loan. Commercial real estate, equipment, and other business assets are considered business collateral. If you're dealing with a lack of collateral in your business, look for other forms of financing, such as invoice financing. Some bankers or lenders consider other forms of assets to grant you a loan when collateral is not an option. But keep in mind that you need a solid collateral base for a more comprehensive business loan.

Financial Statements

Your business requires certain financial statements that maximize the chances of business loan approval. The documents or financial statements are what lenders demand to prove your creditworthiness. Ensure you have a checklist of the required statements while applying for a business loan. Example ‒ most recent personal & business federal tax returns, personal financial statements (many traditional lenders require a personal guarantee), P&L, balance sheet, accounts receivable statement, accounts payable report, business plan, and projections.

Purpose of Lending Request

Loan purpose is a crucial factor that directly impacts a lender's decision to approve your loan request. Lenders use your loan purpose to decide if a credit facility can be extended. An acceptable use of funds could include working capital, purchasing real estate or equipment, or making improvements. A lending request should include justification and business reason. Going the extra mile to provide a convincing business loan request letter can work wonders!

Strength of Business

Did the business struggle, or did it thrive through the pandemic? Be prepared to answer these types of questions if you apply for a business loan during this post-pandemic season. If your business is new and small or depends on seasonality, this may impact your ability to borrow from traditional lenders. Do your homework to determine if you qualify to borrow from non-traditional lenders such as community development financial institutions (CDFI) as an alternative.

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Vanita Lee-Tatum, Executive Contributor Brainz Magazine

Vanita Lee-Tatum is a world-class business developer and strategy consultant, specializing in helping organizations and individuals grow their business potential. Drawing on her own experience as an entrepreneur and her financial skills honed as VP of Banking, Vanita inspires and ignites business owners to create financial growth by teaching them the business development skills needed to flourish. Dedicated to making an impact by sharing her knowledge and expertise to encourage business owners and entrepreneurs of all types, Vanita is a positive force of nature who clients and partners enjoy collaborating with.



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