Introduction
Access to capital is crucial for businesses—whether you’re launching a startup, expanding operations, or managing cash flow gaps. Citibank offers a range of business loans tailored to different needs, from equipment financing and lines of credit to commercial real-estate mortgages. Understanding the eligibility requirements up front can streamline your application and increase your chances of approval. This article breaks down the key criteria Citibank evaluates when considering business-loan requests.
1. Business Profile & Tenure
- Legal Structure: Citibank extends loans to incorporated entities—C Corporations, S Corporations, LLCs, and partnerships—as well as sole proprietorships with strong credit profiles.
- Operational History: Typically, businesses should have at least 2 years of operating history. Some specialized programs (like SBA loans) may accept 1 year or even startups with strong collateral and guarantees.
- Revenue Thresholds: While requirements vary by product, most Citibank business loans target companies generating $250,000 + in annual revenue. Higher-ticket facilities (e.g., real-estate mortgages) often require $500,000+.
2. Creditworthiness
- Business Credit Score: A healthy commercial credit score (D&B PAYDEX ≥ 75 or equivalent) signals on-time payment history.
- Owner Personal Credit: For small or newer businesses, Citibank reviews the personal credit of principals—typically requiring a FICO score of 680+ for favorable rates.
- Debt Service Coverage Ratio (DSCR): Lenders look for DSCR ≥ 1.2, meaning net operating income covers debt obligations by at least 120%.
3. Financial Strength & Documentation
- Profitability & Cash Flow: Positive EBITDA or net income over the past 1–2 years demonstrates capacity to repay.
- Balance Sheet Strength: Adequate working capital and manageable leverage (debt-to-equity ratio ≤ 3:1) reduce credit risk.
- Required Documents:
- Tax Returns: Business (and often personal) returns for the past 2 years.
- Financial Statements: Year-end balance sheets and P&L statements, plus recent interim statements.
- Bank Statements: Typically 3–6 months showing deposits and cash flow consistency.
- Accounts Receivable/Payable Aging Reports: For invoice-financing or lines of credit.
4. Collateral & Guarantees
- Collateralized Loans: Equipment, inventory, receivables, or real estate can secure higher loan amounts and lower rates.
- Unsecured Lines of Credit: For businesses with strong cash flow and credit, Citibank may offer unsecured revolving credit up to predetermined limits.
- Personal Guarantees: Owners of smaller businesses are often required to personally guarantee the debt, aligning incentives and mitigating lender risk.
5. Industry & Use of Proceeds
- Permitted Industries: Citibank lends across most sectors—manufacturing, wholesale, services, healthcare—but restricts financing for high-risk industries (e.g., casinos, speculative real estate).
- Purpose-Driven Loans: Products are tailored to use cases:
- Equipment Financing: 80–100% of equipment cost, with terms up to 5–7 years.
- SBA-Backed Loans: Lower down payments and extended maturities for eligible small businesses.
- Commercial Mortgages: Up to 75–80% LTV on owner-occupied properties.
6. Application & Decision Process
- Pre-Qualification: Submit basic business details online or through a relationship manager to receive preliminary feedback without a hard credit pull.
- Formal Application: Provide full documentation package; complete standardized Citibank loan form.
- Underwriting & Credit Committee Review: Citibank evaluates financial metrics, collateral, industry risk, and strategic fit.
- Term Sheet & Loan Agreement: If approved, you receive pricing, collateral requirements, covenants, and repayment schedule for review.
- Funding: Upon execution of final documents and lien perfection (if applicable), funds disburse to your business account.
7. Tips to Strengthen Your Application
- Maintain Clean Financials: Keep up-to-date, GAAP-compliant accounting records.
- Build Cash Reserves: A cushion of 3–6 months of operating expenses demonstrates prudence.
- Limit New Debt: Avoid large capex loans or credit-card balances immediately before application.
- Demonstrate Growth Plans: A clear use-of-proceeds memo showing how financed assets will drive revenue boosts lender confidence.
Conclusion
Citibank’s diverse business-loan portfolio supports a wide range of commercial needs, but approval hinges on meeting core eligibility requirements: a solid operating history, robust credit, transparent financials, and appropriate collateral or guarantees. By preparing your documentation, optimizing key financial ratios, and aligning your loan purpose with Citibank’s underwriting criteria, you’ll position your business for a smooth application process and favorable financing terms.
Ready to explore your options? Contact a Citibank business banker or visit citi.com/business to start your pre-qualification today.