How to Get Your SME Loan Approved in 2023

You’ll need more than an initial capital to launch and grow a business. Beyond the early investment in machinery and labor, there will be a boatload of further costs to cover. That’s why many entrepreneurs, particularly new ones, may need to take on debt to get their businesses off the ground.

Small and medium-sized enterprise (SME) loans are a practical means of providing financial support for start-up costs. It could come down to how much cash you need and where you can acquire it at the lowest interest rate. But although many small business owners would benefit from access to SME loans, not all of them can qualify. 

If this is your first time applying for a loan for your business, we have put together some pointers to get your application approved.

Strong Credit Rating

Business credit, like personal credit, is based on the company’s proven ability to handle financial resources responsibly. Your credit rating determines whether or not the bank will approve your loan application. 

The interest rate and repayment period will also be based on your credit rating. Therefore, taking the appropriate steps to improve business credit will open up more funding options for your business. 

As a piece of additional advice, business owners should be aware that small business lenders may, and frequently do, check the borrower’s personal credit report. Therefore, it is in your best interest to improve your personal credit score since this will assist you in gaining access to business financing.

Decent Bank Statements

Lenders would dig into its financial standing by reviewing its bank statements to determine if a company is creditworthy. Most financial institutions request statements from the previous six months.

To begin, you must have a positive cash balance. If your bank statement shows a negative cash balance, it indicates you have mismanaged your funds. Also, a lender will always look into the type of deposits you have, where they come from, and the frequency of deposits.

The lender will also check to see if your bank statements are in the name of your business. There are instant bank verification loans that will automatically verify your business’ banking information after you’ve submitted the bank information they need. The lender will double-check your bank’s name and, more significantly, the mailing address where your bank statements are being sent.

Reliable and Comprehensive Business Plan

You’ll need to have important financial statements and projections ready to send over to a lender to prove that there’s a market for the product or service your business provides. One of the easiest ways to do that is to pitch a business plan that shows promise for a huge profit.

Financial backers will also want a competent management team directing the operation. If your business plan is well-conceived, you may find it easier to get a loan approved.

Low Debt-to-Income Ratio 

Loan providers consider the debt-to-income ratio a metric when evaluating whether or not to lend money to your business. Your DTI ratio shows how indebted your company is right now. To put it another way, if your debt-to-income ratio is low, more of your company’s money is available to pay down existing debt and take on new debt. Therefore, the likelihood of your small business being approved for loan increases if your debt-to-income ratio is low.

To qualify for a loan for SMEs, your debt-to-income ratio must be below 50%. This suggests that debt repayment takes up less than half of your profits. The lower your DTI ratio is, the higher your chances of getting a loan, so keep it at 36% or below as much as possible.

Build Trust With Your Lender

Opening up and engaging in active trust with your lender may establish a foundation of confidence that works both ways.

Due to the established relationship, your bank relationship manager may recommend an immediate approval of your request to increase your existing loans if you have a history of timely loan repayments. A bank’s relationship officer’s recommendation is invaluable when evaluating a company’s creditworthiness.

Additionally, tell your lender as soon as you see that your company is suffering financial issues. Notifying your lender of any potential payment delays will allow them to evaluate the situation and help you devise an action plan. Lenders may temporarily cut or eliminate some charges, increase your credit limit, or offer suggestions for moving forward.

Additional Collateral 

When issuing a loan, every lending source seeks to reduce its risk. This is done, in part, by securing the loan with additional financial collateral in case your business defaults on its loan payments.

If you fail to make a payment on a loan, the lender can take possession of anything you put up as collateral, be it a car, a house, or some other piece of property. So if you want to get a small business loan but don’t have good credit standing, you’ll need collateral to reassure the lender.


Before approaching a small business loan lender, you should thoroughly understand the criteria to qualify for a loan. Then, as you grow your small business, we hope you’ll find the advice we’ve shared helpful in securing the funding you require.

Brett Sartorial

Brett is a business journalist with a focus on corporate strategy and leadership. With over 15 years of experience covering the corporate world, Brett has a reputation for being a knowledgeable, analytical and insightful journalist. He has a deep understanding of the business strategies and leadership principles that drive the world's most successful companies, and is able to explain them in a clear and compelling way. Throughout his career, Brett has interviewed some of the most influential business leaders and has covered major business events such as the World Economic Forum and the Davos. He is also a regular contributor to leading business publications and has won several awards for his work.