Applying for a business loan can feel uncertain if you’re not sure how lenders review applications. Many business owners assume approval is based on a single factor, such as credit score or revenue, but lenders take a broader view. Understanding what they evaluate can help you prepare stronger financials and avoid delays.
At InterMountain Business Lending in Ogden, UT, we work with business owners across Utah and Idaho to guide them through the lending process and clarify what truly matters when applying for financing.
Business Financial Performance
One of the first areas lenders review is your business’s financial health. This typically included profit and loss statements, balance sheets, and recent tax returns. Lenders want to see consistent revenue, manageable expenses, and enough cash flow to support loan payments.
They’re not only looking at how much money your business makes, but how predictable that income is. Stable performance over time often matters more than one strong year followed by fluctuations.
Cash Flow and Debt Coverage
Cash flow is a critical factor in loan decisions. Lenders calculate whether your business generates enough income to comfortably cover existing debts plus the new loan. This is often measured through a debt service coverage ratio (DSCR).
A strong cash flow profile shows that your business can handle monthly payments without cutting into day-to-day operations. If cash flow is tight, lenders may recommend adjusting loan terms or exploring different financing options.
Credit History
Both business and personal credit histories play a role in most business loan applications. Lenders review payment history, outstanding balances, and overall credit usage to assess risk.
A less-than-perfect credit score doesn’t automatically disqualify you, especially with SBA financing, but it may affect loan structure, interest rates, or down payment requirements. Transparency and consistency matter more than perfection.
Time in Business and Industry Experience
Lenders also consider how long your business has been operating and your experience in the industry. Established businesses with proven management teams typically face fewer hurdles during the approval process.
For newer businesses, lenders look closely at the owner’s background, business plan, and projections. Demonstrated experience in the industry can help offset limited operating history.
Collateral and Equity
Collateral provides lenders with additional security. This may include equipment, real estate, or other business assets. In some cases, a personal guarantee is also required.
Equity investment is another key consideration. Lenders want to see that business owners have invested their own capital into the company. This shared risk shows commitment and can strengthen an application.
Purpose of the Loan
How you plan to use the funds matters. Lenders want a clear, specific explanation of the loan purpose and how it supports business operations or growth.
Well-defined uses such as purchasing equipment, acquiring real estate, or supporting working capital are easier to evaluate than vague or undefined requests. Clear planning builds confidence in your application.
Working with a Local Lending Partner
Understanding what lenders look for can make the application process smoother, but having guidance along the way can make a significant difference. Local lenders understand regional markets, seasonal trends, and industry conditions specific to Utah and Idaho.
At InterMountain Business Lending, we help business owners in Utah and Idaho prepare complete, well-structured loan applications. Our goal is to present your business clearly and accurately, increasing the likelihood of approval and aligning financing with your long-term goals.