How do banks decide business loan approval?

Last updated May 2026 · Reviewed by David Chen
Quick Answer

Banks use the "5 Cs of credit": Character (personal credit, history), Capacity (cash flow, ability to repay), Capital (down payment, owner investment), Collateral (assets to secure loan), Conditions (industry, economy, loan use). Most banks require 680+ FICO, 2+ years in business, profitability, and collateral.

Key Details

  • Character: personal credit history
  • Capacity: cash flow and DSCR
  • Capital: down payment and equity
  • Collateral: assets to secure loan
  • Conditions: industry and economy
  • Bank standard: 680+ FICO, 2+ years, profitable
Answer by David Chen — Senior Business Funding Editor
12+ years in alternative lending. $200M+ underwritten.

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