Business credit, cash flow, and lenders: What you should know in 2026

Running a business is rarely a straightforward path. There will likely be lots of ups and downs, and being able to handle both is how businesses survive and thrive. 

Getting funding when your business needs it is one key to adaptability.

But in 2025, some lenders have become more selective. Many are focused on lending to businesses that show consistent revenue and financials, and strong payment histories.

Understanding how business credit and cash flow work together can give you insights into how to position your small business for growth.

It’s still possible to access capital in 2026

Despite a small dip in interest rates in late 2025, interest rates overall remain fairly high. Coupled with economic challenges like tariffs that are hurting sales and profit margins, some borrowers are finding it more difficult to get small business loans. 

Yet business owners in a variety of industries are successfully getting financing from lenders of all types, ranging from alternative lenders to traditional banks. 

The same factors lenders look for are the same ones that make businesses stronger. Understanding these key factors can help you grow a business that can handle what comes next.

Target the two core areas lenders scrutinize

Lenders want to be able to answer two main questions when you apply for financing:

• Will you repay the debt?
• Can you repay the debt?

If your business information helps them say "yes" to both questions, you may significantly improve the odds your application will get approved.

Strong cash flow helps answer the first question; good credit helps answer the second. 

Businesses that can demonstrate both strong cash flow and good credit often have more choices when it comes to getting the funding they need, and often at more favorable terms.

Getting funding is harder but not impossible

The lending environment has shifted, starting in 2020 and continues to change since then. In recent years, interest rates have been somewhat elevated compared to recent years, and banks have tightened their credit standards in response to economic uncertainty and concerns about recession risk.

While some types of small business lending have seen declines, funding hasn't disappeared.

The Kansas City Fed's Small Business Lending Survey for the second quarter of 2025 reported that "credit standards tightened and credit quality declined, continuing a long-term trend.” It also found that outstanding loan balances increased, and predicted that “over the next 12 months, respondents expect trade policy, labor costs, and inflation to negatively impact loan demand.” (The survey generally reflects lending by commercial banks to small businesses with less than $5 million in assets.)

Higher borrowing costs affect your bottom line. A $100,000 loan at 8% costs roughly $2,200 more annually in interest than the same loan at 6%. Factor this into your projections when evaluating whether new debt makes sense.

SBA loans continue to be approved by the U.S. Small Business Administration. As of October 22, 2025, the SBA had approved just over 78,000 SBA loans for FY2025, with an average loan size of $477,571. This is important because government-backed programs continue to be an important source of small business funding for both new and existing businesses.

Core factors that influence lenders' risk perception

When considering risk, lenders and other companies that offer financing typically consider a a combination of these factors:

1. Revenue/sales
2. Cash flow
3. Creditworthiness
4. Time in business
5. Industry
6. Use of loan proceeds

Of these, cash flow and credit are the two pillars that often carry a lot of weight with the greatest number of lenders.

Here's how to use these pillars to position your business for financing and growth in 2026.

Pillar #1 – Establish robust cash flow

Cash flow, along with healthy income, help demonstrate the capability of your business to repay your debt. Showing lenders you have the financial capacity to repay financing is one of the most important factors when it comes to qualifying for loans.

Why cash flow matters to lenders in 2026

Strong revenue (income) and positive cash flow help a lender understand whether your business is able to handle payments on new loans or business financing. A small business with healthy cash flow can afford to make payments, while a business with cash flow shortfalls is likely to have trouble making payments.

How to maximize and present your cash flow

First and foremost, use a business bank account for business purposes (rather than your personal account), and avoid commingling business and personal funds. Business bank accounts are often considered the source of truth for your business finances since they offer a snapshot of your financial picture at any given time. . 

By making sure your business revenue goes into your business bank account, you’ll be able to clearly track and document revenue. Similarly, paying expenses from your business bank account will make it easy to calculate cash flow (the amount of money going in and out of your business). 

You can use a business credit card or charge card to pay business expenses; just make your credit card payments from your business checking account.

If your business accepts alternative payment methods like PayPal, Venmo, or CashApp, try to run that money through your main business bank account if possible. For example, have your balances from those accounts transferred to your main checking account. 

This makes it easier for lenders (and you) to view your total revenue, and also makes it easier to track cash flow from bank statements.

Don't try to hide debt. If your business is repaying debt, make sure you disclose that debt on your application, if asked. If you don't, and the lender discovers you have undisclosed debt — often through UCC liens or payments from the business bank account — your application may be declined.

Review your business financial statements to look for ways to improve cash flow by increasing revenues, reducing expenses, or both. Not only can this help improve the chances of getting your loan application approved, it can also improve your business financial health.

Read: 23 ways to improve cash flow for your small business

Types of cash flow statements and what to focus on

A cash flow statement, also referred to as a statement of cash flows, is an essential financial statement that provides insights into how well your business is doing both in generating cash as well as using it to pay operating expenses and debt.

A cash flow statement details cash flow from operations, investing, and financing. It can answer important questions about the businesses' financial health such as:

• Can the business pay its loan and financing payments on time?
• Is there enough money available to cover operating expenses?
• Are there sufficient emergency funds for unplanned expenses?

Not all lenders will require detailed financial statements. While traditional lenders like banks or credit unions may require them, many online lenders or financing companies will review business business bank statements to understand how much money the business is bringing in, how frequently, and from how many sources.

Pillar #2 – Build strong business credit

Business credit helps lenders understand whether your business pays accounts on time. Your payment history, how you use credit, and how long you've been managing business accounts all factor into credit scores that lenders use to assess risk.

Not all credit accounts appear on business credit reports, but those that do provide data about payment history — a key factor in many credit score calculations. 

Importance of credit score and history for businesses

Your business credit scores may affect whether lenders approve your application and what rates they offer. Higher scores may mean better terms, while lower scores can lead to more expensive financing, or even rejection of your loan application. 

Business credit operates somewhat differently than personal credit. There are three major business credit bureaus — Dun & Bradstreet (D&B), Experian, and Equifax — and each uses its own scoring models.

Understanding business credit scoring models helps you know what to improve. 

For example, the Dun & Bradstreet PAYDEX^® Score ranges from 1–100 and focuses specifically on whether you pay vendors on time or early. A score of 80 or above typically signals low risk to lenders. Meanwhile, the Experian Intelliscore Plus^sm (versions 1 and 2) also uses a 1–100 scale but weighs multiple factors including payment history, credit utilization, and public records.

Read more about specific scoring models:

• Equifax business credit reports
• Experian Intelliscore Plus
• Dun & Bradstreet PAYDEX Score

Unlike personal credit scores, which typically range from 300–850, business credit scores vary by bureau and model: Some use a 0–300 scale, others use 1–100, and newer models often align with the familiar 300–850 range. This can make it confusing to track, but using Nav Prime can make it simpler to decipher your scores and understand where you stand.

Business credit reports may include data from the Small Business Financial Exchange (SBFE), a trade association that collects payment information from financial institutions. If you have business loans, credit cards, or equipment leases with SBFE member institutions, that payment history may appear in credit reports that lenders review.

Learn more about the SBFE.

Methods to improve your company credit score

Building business credit requires establishing accounts that report to credit bureaus, paying on time, and keeping debt at reasonable levels. Here's your action plan:

• Get a D&B D-U-N-S^® Number: This unique nine-digit identifier from Dun & Bradstreet tracks your business credit profile in its system. Request one for free at DNB.com.
• Get tradelines: To establish a credit history, you need accounts that report to business credit bureaus. A popular place to start is with net-30 accounts from suppliers that report payment history to credit bureaus. Nav's list of net-30 vendors helps you identify places to start.
• Pay invoices on time or early: Payment history matters a lot when it comes to calculating credit scores. Business credit tracks Days Beyond Terms (DBT) which means payments that are one day late may impact your credit scores.
• Get a business credit card that reports to credit bureaus: Major card issuers typically report to business credit bureaus or the SBFE network, which feeds data to credit bureaus. Use the card regularly and pay on time to help build a positive history.
• Separate business and personal finances: Get an Employer Identification Number (EIN) and open a business bank account. Using personal accounts or your Social Security Number for business transactions makes it harder to build a distinct business credit profile.
• Keep credit utilization low: Try to use less than 30% of your available credit limits. High utilization signals financial stress to lenders.

Monitor your credit reports regularly: Check for errors that could hurt your scores. Unlike personal credit, business credit isn't covered by the Fair Credit Reporting Act, so you need to stay on top of your reports proactively.

Bring credit and cash flow together for lenders

Strong credit and strong cash flow together make for a business that's attractive to lenders, suppliers, potential partners, or even buyers. Building both while you build your business will make it much more successful in the long run.

Anticipate what banks want to evaluate

Banks often follow structured processes when reviewing loan applications. Understanding what they may need can help you prepare properly and avoid delays.

Documentation requirements may include include:

• Business and personal tax returns (usually 2–3 years)
• Profit and loss statements (may also be called income statements)
• Balance sheets
• Cash flow statements or bank statements (3–6 months)
• Business plan with financial projections (for larger loans or startups)
• Personal financial statement from business owners
• Legal documents (articles of incorporation, business licenses, commercial leases)
• Accounts receivable aging reports (for established businesses)

The typical bank loan process unfolds in stages. First, you'll submit a preliminary application with basic information about your business and financing needs. If your business fits their criteria, they'll request full documentation.

Next comes underwriting, where the bank often analyzes details about your financial statements, credit reports, and cash flow. They may calculate debt service coverage ratio (DSCR) — typically requiring at least 1.25, meaning your cash flow must cover debt payments by 125%.

Banks then conduct additional due diligence, which may include verifying your business licenses, checking for liens, reviewing lease agreements, or sometimes even requiring site visits for larger loans.

Finally, if approved, you'll receive a loan commitment letter outlining terms, rates, and conditions. You'll need to provide any remaining documentation and meet conditions before closing.

Common reasons for delays or denials in the loan application process:

• Incomplete financial documentation
• Tax returns that don't match stated income
• Undisclosed existing debt discovered during review
• Credit scores below minimum thresholds (often 650+ personal credit for business owners)
• Insufficient cash flow to support new debt payments
• Recent late payments on existing accounts
• Public records like tax liens or judgments
• Businesses in restricted industries

Some lenders will publish minimum lending requirements including:

• Minimum credit scores
• Annual revenues or average monthly revenues
• Time in business
• Acceptable or disqualified industries

But you won't always see requirements clearly stated on lender's websites. You should be prepared for a credit check as well as verification of key factors like revenues.

Business credit card issuers are a little different than other types of loans. To qualify for a business credit card, most issuers will check a personal VantageScore^® or FICO^® score, and will accept stated household income from all sources, not just the business.

Synchronize your cash flow and credit

There's a popular saying in business circles, "You can't improve what you don't measure." If you are in a financial fog when it comes to your business, it's going to be hard to make positive changes.

Understanding and monitoring your cash flow and credit is the first step to improving them.

There's another reason to monitor both these metrics. They are often the first warning signs of problems, including personal or business identity theft, or a business that's starting to struggle financially.

Proactively address weaknesses or gaps

It's always a good idea to understand the strengths and weaknesses of your business, whether talking about your position in the marketplace, or your business financial health.

You can then focus on finding opportunities based on your strengths, while improving weaknesses, instead of spinning your wheels in frustration.

Here are a couple of examples of how this can work.

If your business is a startup, you can assume it will be more difficult to get startup financing. While there are some startup loans, in reality it can be challenging to get financing in the first couple of years.

Instead of spending hours trying to find the needle-in-a-haystack bank that will give your business a startup loan, you may want to get a 0% APR business credit card and use that (carefully) to meet your initial working capital needs while you focus on bringing in revenue.

Or let's say you're a business owner with an ecommerce business that's 2–3 years old and growing. Even if you're making steady sales, you probably need financing to invest in inventory to help your business really scale up. Banks may not understand your business, or be willing to lend to what they consider a risky ecommerce business.

But inventory financing could give you the funds you need to meet demand.

Knowing your strengths and weaknesses helps you focus on what you can do now and lets you focus on growing your business.

Assess financing options beyond traditional loans

There are many different types of financing available, and understanding your loan options can help you find the right for your business needs. These include:

• Business line of credit
• Term loans
• Equipment financing or leasing
• Business credit card
• Commercial real estate loans
• Invoice factoring or financing
• Merchant cash advances
• Vendor terms
• SBA loans
• Microloans
• Crowdfunding

Many business owners will use more than one type of financing over the course of their business, and it's not unusual to have a few types of financing lined up at any given time.

While some of the best rates are available on loans from financial institutions like banks or credit unions, it is often harder to qualify. The loan application process may be quite involved, and financial statements, business tax returns, or even a business plan, may be required.

Partner with experts to get affordable funding

As you’ve just seen, there may be lots of different types of financing your business will use at different stages of business growth, each with different eligibility requirements. Fortunately, you don't have to become an expert in all of them. Instead you can tap experts who can help your business identify financing options. 

Nav Prime may be an option for your business

Nav Prime can help your business check, manage, and monitor business credit, and give you tools to support business growth. You'll get:

Detailed credit reports: Get detailed personal and business credit data from multiple business and personal credit bureaus, so you can better understand how lenders and credit issuers may view your creditworthiness. Monitor your progress as you build credit.

Tradeline reporting: Nav Prime submits payments as a tradeline to major business credit bureaus, which may help to build your business credit profile.

Cash flow: Regular bookkeeping through Cash Flow Health helps you spot issues early and make smarter decisions. Reviewing transactions and reports can highlight rising costs, unused expenses, or unusual activity before they impact your cash flow. With automated categorization, transaction reminders, and real-time insights, Nav turns bookkeeping from a once-a-year task into an ongoing habit that supports healthier finances, better credit readiness, and long-term business growth.

Impact of current economic climate on small business lending

Economic conditions may directly affect borrowing costs and whether businesses qualify. Here's what business owners need to know about the current environment:

Federal Reserve policy shapes lending rates. The Fed has raised interest rates significantly over the past few years to combat inflation. While rates have stabilized and even dropped recently, they remain elevated compared to the near 0% rates after the pandemic. This can mean higher costs on variable-rate loans and new fixed-rate financing.

Key economic factors affecting lenders in 2026

• Inflation pressures force businesses to spend more on supplies and labor, squeezing profit margins and making lenders more cautious about cash flow sustainability
• Recession concerns lead banks to tighten lending standards, requiring higher credit scores and stronger financials than in previous years
• Rising interest rates increase debt service costs, making it harder for businesses to qualify under debt service coverage ratio requirements
• Labor market tightness drives up wage costs, affecting profitability calculations that lenders review

Market data shows the impact

• Small businesses have been turning to alternative sources of financing, including credit cards
• Average interest rates on small business loans have increased 2–3 percentage points since 2022
• Less than half (41%) of small business owners who sought financing (employer firms) received all the funding they sought 

Find more details on the current state of small business credit here.

Common mistakes to avoid

Learning from others' errors can save time and money. Here are some common mistakes that hurt business owners' chances of getting approved:

• Mixing personal and business finances: Using personal accounts for business transactions makes it impossible to demonstrate business cash flow clearly. Lenders may reject applications when they can't verify revenue through business bank statements.
• Waiting until you desperately need money: Applying when you're in financial distress shows in your numbers. Lenders can tell when cash flow is deteriorating, and they'll either decline the application or charge premium rates.
• Ignoring personal credit: Even for business loans, many lenders check owners' personal credit scores. A low personal credit score can block you from business financing, especially for newer businesses.
• Applying to too many lenders at once: Multiple hard credit inquiries in a short period can hurt your scores or signal risk to underwriters. Be strategic about where you apply.
• Failing to check credit reports before applying: Errors on credit reports are not uncommon. Discovering mistakes after you've been declined wastes time. Check your reports first and dispute any inaccuracies.
• Overstating revenue or minimizing expenses: Lenders verify the numbers you provide through bank statements and tax returns. Mismatches between your application and documentation trigger automatic denials.
• Forgetting to disclose existing debt: Hidden debt discovered during underwriting destroys trust and typically results in immediate rejection. Be transparent about all obligations.
• Choosing the wrong financing type: Applying for a traditional term loan when you need working capital, or seeking a line of credit for equipment purchases, isn’t helpful for you or the lender. Match the financing type to your actual need.
• Neglecting to build business credit first: Expecting to qualify for substantial financing without any business credit history may mean disappointment. Establish business credit before you need it. 
• Skipping the business plan: For larger loans, especially with banks, showing up without a clear plan for how you'll use funds and repay them suggests poor preparation.
• Ignoring industry-specific requirements: Some lenders avoid certain high-risk industries entirely. Research whether lenders work with your business type before spending time on applications.
• Not shopping for the best financing: Terms vary significantly between lenders. Spending the time to find the right financing could save thousands in interest and fees.

Preparing your business plan and financial projections for lenders

A solid business plan backed by realistic projections demonstrates you understand your business and have thought through how you'll repay financing. 

Not all lenders want to see a business plan, though. They are often more commonly used for SBA loans and other types of traditional loans (banks and credit unions). 

Essential components of a business plan

• Executive summary: One-page overview of your business, financing request, and planned use of funds. Write this last, even though it appears first.
• Company description: What you do, who you serve, your legal structure, and competitive advantages. Keep it focused on facts rather than hype.
• Market analysis: Your target customers, market size, and competitive position. Include relevant data about your industry and local market conditions.
• Organization and management: Your leadership team's experience and qualifications. Lenders want to see you have the expertise to execute your plan.
• Products or services: What you sell, pricing structure, and what makes your offerings valuable to customers. Be specific rather than generic.
• Sales and marketing strategy: How you acquire customers and your customer acquisition cost. Include your distribution channels and marketing budget.
• Funding request: Exactly how much you need, how you'll use it, and over what timeframe. Break down the use of funds into specific categories.
• Financial projections: Three-year projections showing revenue growth, expenses, and profitability. More detail on this below.

Creating realistic financial projections

Some lenders want to see details of your current finances along with financial projections for future growth. 

Why do they want to see this? They want to assess whether your business can afford the new loan. 

Here’s how to put this information together:

1. Start with historical data: Base projections on actual performance from previous years. Lenders immediately distrust projections that show sudden spikes disconnected from your track record.
2. Build monthly projections for year one: Break down revenue and expenses month by month, accounting for seasonality in your business. This level of detail shows you understand your cash flow patterns.
3. Use quarterly projections for years two and three: Less detail is acceptable for future periods, but growth assumptions should be justified based on specific actions you'll take.
4. Include financial statements: Depending on the lender’s requirements, you may need to provide income statements, cash flow statements, and balance sheets. Each tells a different part of your financial story.
5. Account for the loan itself: Include loan payments in your projections to demonstrate you can handle the additional debt service. Calculate the monthly payment and show it in your cash flow projections.
6. Justify your assumptions: Explain the reasoning behind growth rates, pricing changes, new expenses, or other significant assumptions. Lenders evaluate your thinking process as much as the numbers themselves.
7. Run sensitivity analysis: Show what happens if revenue comes in 20% below projections. This demonstrates you've thought through risks and have contingency plans.

Key ratios lenders calculate from your projections

• Debt service coverage ratio: Your cash flow divided by debt payments. Lenders typically want to see 1.25 or higher.
• Gross profit margin: Shows whether your pricing supports your overhead and debt service. Industry standards vary, but declining margins raise red flags.
• Break-even point: When will you generate enough revenue to cover all expenses including loan payments? Lenders want realistic timeframes.
• Return on investment: How quickly will the investment generate returns? This matters especially for expansion or equipment financing.

Presentation tips for creating a strong business plan

• Keep the business plan to 15–20 pages max. Lenders won't read lengthy documents. Appendices can contain additional detail for those who want it.
• Use clear formatting with headers and bullet points. Make it easy to scan and find key information quickly.
• Proofread carefully. Typos and errors suggest carelessness that makes lenders question your attention to detail in business operations.
• Tailor the plan to your audience. Banks want different information than alternative lenders. Research what specific lenders prioritize.
• Be honest about challenges and risks. Pretending your business faces no obstacles destroys credibility. Showing you've identified risks and have mitigation strategies builds trust.

Remember that lenders see hundreds of business plans. Yours needs to be clear, realistic, and demonstrate you've done the work to understand what makes your business financially viable. Generic templates filled with buzzwords won't cut it — lenders want to see your actual business backed by real numbers.

The bottom line

In a lending environment that continues to evolve, building both your business credit and cash flow is one of the most effective ways to expand your financing options and support long-term growth. 

We don’t recommend trying to do it all at once — pick one and start there:

1. Getting clear on the state of your credit and cash flow
2. Understanding what lenders look for
3. Learning what documentation you need for good financial health
4. Proactively addressing any gaps in your financial profile

By taking it step by step, you may not only improve your chances of approval but also build a more resilient business in 2026 and beyond.