There is no set amount for a business loan approval. It will depend upon personal and business financial resources and the use of the loan proceeds. To determine how much of a loan you can be approved for, you need a business plan and documents revealing the amount of personal and business income, expenses, assets and debt.
The loan application amount is determined, in part, by the purpose of the loan.
Explaining Your Financial Situation
For a loan approval that meets business needs, you must put together portfolios of personal and business finances. The stronger these are, the higher the approved loan amount will be. The personal documents must include a personal budget of income from all sources and spending. The more income you have relative to spending, the better. The firm's credit history and score, which should be over 700, will be reviewed by a lender. You should include a schedule of personal assets and debts. A lender is looking at your ability to handle money as he analyzes personal finances. If personal finances are strong, loan approval will be for a higher amount.
The Business Financial Portfolio
How well you have handled the business is important for a loan approval. Since profitability is important, you must have business income statements and balance sheets that reveal the amount of business assets, liabilities and owner equity (investment). How much money is invested in the business by the owner will be a key factor in the amount of a business loan; and a business that is showing a profit can expect a higher loan amount.
Business Financial Projections
While past business management is important, a lender wants to see how the proposed loan will contribute to future profitability. Determine the loan amount you need, and use it in projected business income statements for the next few years. Also include the proposed loan amount in a schedule of projected assets and liabilities. A projected monthly cash flow spreadsheet is necessary to show sources and uses of funds, which should indicate that there is enough cash each month to cover expenses.
Loan Application Assistance
Some parts of the preparation are difficult, so you may need assistance in determining how much you can apply for, as well as help with market analysis and financial projections. The U.S. Small Business Administration provides a network of Small Business Development Centers in all states and large cities. A counselor will meet with you to assist in completing the business plan and, based on financial data, help determine the loan amount you can apply for. The counselor's services are free.