What Differentiates a Business from a Startup?
Established Business Criteria
Compared to startup funding, an established business has many more options for growth, expansion or acquisition. A business qualifies for growth funding when it meets these criteria:
Business Loan Application Trends
Why Businesses Apply for Loans
Respondents were able to select up to three reasons (Forbes Advisor Survey, April 2023)
The Three Pillars of Business Funding Qualification
The funding options that a business qualifies for change based on three major factors. The better qualified a client is, the longer terms and better rates they may qualify for.
Qualification Spectrum
🔴 Lower Qualification Level
- Time in Business: 3-12 months
- Monthly Revenue: $5,000 - $15,000
- Credit Score: 550-650 - Improve your credit score
- Available Options: Working Capital, MCA, Equipment Financing
🟡 Medium Qualification Level
- Time in Business: 12-24 months
- Monthly Revenue: $15,000 - $50,000
- Credit Score: 650-720
- Available Options: Term Loans, Lines of Credit, Equipment Loans
🟢 Higher Qualification Level
- Time in Business: 2+ years
- Monthly Revenue: $50,000+
- Credit Score: 720+
- Available Options: SBA Loans, Long-term Funding, Real Estate Loans
Main Business Funding Options
Long-Term Funding Deep Dive
Long-Term Funding Specifications
What is Long-Term Funding?
Long-term funding typically has much stricter requirements and usually has more than a 5-year term. Long-term funding options are typically very close to if not the same as bank funding such as SBA 7(a) loans.
Why Choose Long-Term Funding?
The funding typically takes more than a month or more to fund. This funding option is best for businesses that would typically go directly to the bank. The rates for long-term funding are also some of the lowest that can be found which is why the qualifications are more strict.
Who's Eligible for Long-Term Funding?
- Must have been in business for a minimum of 2 years
- Must have more than $50k a month in revenue
- Must have above a 675 credit score
- Strong business financials and cash flow
- Detailed business plan and financial projections
Who is NOT Eligible?
- Startups and new businesses (under 2 years)
- Adult industries
- Airlines and regional airline companies
- Auto dealerships and used car dealers
- Bitcoin companies and cryptocurrency
- Bus companies and charter services
- Churches and religious organizations
- Collection agencies
- Check cashing companies
- Bail bond companies
- Debt consolidation companies
Required Documentation
- 3 Months of Bank Statements (All Pages)
- Completed application
- 2 years of tax returns
- Business Profit and Loss statement
- Business plan (for larger amounts)
- Financial projections
Strategic Growth Funding Approaches
1. Revenue-Based Growth Strategy
Focus on funding that aligns with your revenue cycles and growth projections:
- Start with working capital for immediate needs
- Graduate to term loans for medium-term projects
- Access lines of credit for flexible cash flow management
- Pursue long-term funding for major expansion
2. Credit Building Strategy
Systematically improve qualifications for better funding options:
- Monitor and improve business credit scores
- Maintain strong personal credit as backup
- Build relationships with multiple lenders
- Document all business financial improvements
3. Diversified Funding Portfolio
Don't rely on a single funding source:
- Combine different types of funding for different needs
- Maintain multiple lender relationships
- Keep funding options open for opportunities
- Plan for seasonal or cyclical funding needs
Advanced Funding Strategies
Equipment Financing
Specialized funding for equipment purchases where the equipment serves as collateral:
- Lower rates due to collateral
- Terms typically match equipment lifespan
- Easier qualification than unsecured loans
- Tax advantages through depreciation
Invoice Financing
Convert outstanding invoices to immediate cash flow:
- Fast access to cash (24-48 hours)
- No debt on balance sheet
- Qualification based on customer creditworthiness
- Ideal for B2B businesses with net terms
SBA Loan Programs
Government-backed loans with favorable terms:
- SBA 7(a): General business purposes, up to $5M
- SBA 504: Real estate and equipment, up to $5.5M
- SBA Microloans: Small amounts up to $50k
- SBA Express: Faster approval, up to $500k
Alternative Lenders
Non-bank lenders offering flexible options:
- Faster approval processes
- More flexible qualification criteria
- Higher rates but easier access
- Specialized industry knowledge
For businesses with existing credit cards looking to optimize their capital: Business Credit Card Conversion can help you access additional funding from your current credit lines.
Optimizing Your Funding Application
Financial Documentation Best Practices
- Maintain clean, organized financial records
- Prepare detailed cash flow projections
- Document all revenue sources clearly
- Show consistent growth trends
- Explain any financial anomalies proactively
Application Timing Strategies
- Apply during strong performance periods
- Avoid applications during seasonal low periods
- Time applications with business milestones
- Allow sufficient time for due diligence
Lender Relationship Management
Building strong relationships with lenders provides long-term advantages:
- Regular communication about business performance
- Transparency about challenges and solutions
- Early discussions about future funding needs
- Referrals to other appropriate lenders when needed
Common Growth Funding Mistakes
- Applying for funding without clear use case
- Underestimating total funding needs
- Not understanding total cost of capital
- Applying to too many lenders simultaneously
- Ignoring covenant requirements
- Not planning for repayment scenarios
- Mixing business and personal expenses
- Failing to monitor business credit regularly
Recovery Strategies
If your funding application is denied:
- Request specific feedback on denial reasons
- Address the issues identified
- Wait appropriate time before reapplying
- Consider alternative lenders or products
- Improve financial metrics and reapply
Future Funding Preparation
Building for Scale
Prepare your business for larger funding rounds:
- Implement robust financial systems and controls
- Document all business processes and procedures
- Build strong management team and advisory board
- Establish clear growth metrics and KPIs
- Develop comprehensive strategic plans