Ten Questions to Ask a Lender Before You Apply

Most owners treat the application as the first contact with a lender. They fill out the form, submit the documents, wait three weeks, and find out then whether they were ever eligible.

That's backwards, and it's expensive. Each application typically involves a hard credit inquiry, and several in a short window lowers your score — meaning the fourth lender sees a weaker file than the first did, for no reason other than the shopping itself.

Before any of that, you can call and ask. Lenders answer these questions. It costs nothing, involves no credit pull, and frequently ends with "we don't lend to businesses under two years" — which just saved you three weeks and an inquiry.

Here's what to ask.

1. What are your minimums?

The single most useful question. Time in business, minimum credit score, minimum annual revenue. Ask for all three as specific numbers.

Answers vary enormously between institutions — a bank might say two years and 680, a CDFI might say six months and no fixed floor. If you're clearly below the threshold, you're done with this lender for now, and you have a concrete target for when to come back.

2. Do you lend to my industry?

Many lenders exclude sectors outright: restaurants, trucking, cannabis-adjacent businesses, real estate investment, anything they've had losses in. This has nothing to do with your file and everything to do with their policy.

Name your business specifically. "Food truck" and "restaurant" can be different answers at the same institution.

3. What loan sizes do you actually write?

Both ends matter. Banks often won't go below $50,000 because the underwriting cost doesn't justify it. Microlenders may cap at $50,000.

Ask what they've closed recently in your range, not just what their published limits are. A lender technically able to write $25,000 loans but who hasn't done one in a year is not a realistic option.

4. What product would you put me in, and how is it structured?

You want to know whether you're being offered a term loan, a line of credit, equipment financing, or a revenue-based product, and what the repayment structure is — monthly, weekly, or daily.

Daily remittance is the answer to listen for. It changes the cash-flow impact substantially, and the downstream effects are covered in what a merchant cash advance does to your file.

5. What is the total cost, including every fee?

Ask for the rate, then ask separately for origination fees, packaging fees, closing costs, servicing fees, and any third-party costs like appraisal or environmental review.

Then ask for an annualized cost, and don't accept a monthly payment as the answer. If a lender quotes a factor rate or a "total payback," convert it yourself using the method in APR versus factor rate. A lender who won't give you a fee breakdown before application is telling you something.

6. Is there a prepayment penalty?

Matters more than people expect. If the business does well and you want to pay off early, a penalty can erase the benefit. It's also a key variable if you're planning to refinance a co-signer off the loan or refinance the debt later.

7. What will you require as security?

Collateral, a personal guarantee, a blanket lien on business assets, a co-signer. A UCC filing on all business assets can block you from borrowing elsewhere while it's in place, so ask specifically whether they file one.

Nearly every small business lender will require a personal guarantee from owners at 20% or more. If a lender says otherwise, ask them to confirm it in writing.

8. What documents do you need, and how long does this take?

Get the document list up front so you can assemble it in one pass rather than in six emails over three weeks — the standard set is in our document checklist.

On timing, ask for two numbers: how long until a decision, and how long until funding. Those are different, and the gap surprises people. Realistic ranges are in our approval timeline guide.

9. Is the initial review a soft pull or a hard pull?

Many lenders can pre-qualify on a soft inquiry that doesn't affect your score, and only pull hard when you formally apply. Ask, and don't assume — if you're shopping several lenders, this determines the order you do it in.

10. If you can't do this, who can?

The most underused question in small business lending. Loan officers know their local market. A bank that can't lend to you will often name the CDFI that can; a CDFI that's out of capital will name another.

Ask it even when the answer is yes, because a second option is useful anyway. And if you've already been declined somewhere, this question belongs in that conversation too — see what to do after a denial.

How to make the call

Ask for a business lender or commercial loan officer, not the teller line. Say you're researching before applying and have a few questions — that framing gets you a real conversation instead of an application form.

Have ready: how long you've been operating, roughly what you earn annually, your approximate credit score, how much you want, and what it's for. Thirty seconds of context lets them answer precisely instead of generally.

Take notes. After four lenders the answers blur, and the comparison is the point.

What the answers tell you about the lender

The content matters, but so does the manner.

Good signs: specific numbers, straightforward fee disclosure, a clear "no, and here's who might," willingness to tell you what's missing from your file.

Warning signs: refusing to discuss costs until you apply, any upfront fee before a decision, "guaranteed approval," pressure to decide today, a quote expressed only as a daily payment amount.

A legitimate lender has no reason to hide pricing from someone who hasn't applied yet. One that does is counting on you being too far into the process to walk away later.

Where to spend the calls

Three or four calls is usually enough. A sensible order:

1. Your own bank. You have the relationship and the deposit history. Cheapest money if you qualify.
2. A local credit union. Often more flexible than a bank at small loan sizes.
3. A CDFI in your area. Especially if you're early-stage, thin-file, or below bank thresholds. The SBA versus CDFI comparison covers where the programs overlap.
4. An SBA lender, if the amount and timeline justify the process.

Knowing your own file before you dial makes all four conversations shorter and more accurate — the readiness checklist covers what to assess first.

Ten minutes per call. Four calls. Compare against three weeks of waiting to be told you were never eligible.

Ready to see where your business stands? Try PreCap Logic free at getprecap.com — no signup required.