Applying For Business Loans
Many people who eventually want to open up their own businesses and work hard to save money to fund their new business. However, they will need a business loan from a bank or via SBA, Small Business Administratin, in order to make it happen. Banks, credit unions, and commercial loan broker are the right sources to go to for a business loan.
Before You Apply For A Business Loan
The first thing a business loan borrower should do is to get a written business plan together as well as prepare a resume on the partners, if any, on their qualifications and show the business loan lender why they will be successful and why they should lend the business loan borrower the money to fund their business. They should prepare financial statements and asset information and collateral information as well. A business plan should include a detailed executive summary and a detailed description of the scope of the business as well as goals and forecasts of the subject business revenues and expenses. It should also include an overview of the competition and marketing plan. If the business is an existing business, the business lender will want to see profit and loss statements, income tax returns, and financial statements for the business for the past three years. The business lender’s underwriting department will underwrite the business and the strength of the guarantor/borrower. They will want to know the borrower’s past experience in the industry as well as their financials.
Requirements For Business Loan Application
Although the business loan lender will treat the business operations as its own entity, the lender will want to see whether the guarantor of the business loan will be an owner operator or a passive investor and will need to see that the guarantor has the ability to run the business successfully and is able to repay the business loan timely. Business loans are viewed as risky loans so the business loan lender will especially pay attention of compensating factors such as assets, reserves, and collateral in the event if the business fails. The business loan lender will scrutinize and analyze the guarantor’s credit report, credit scores, assets, bank statements, personal financial statement and three years personal and business tax returns.
Collateral On Business Loans
Business loan lenders will require strong collateral in order to approve business loans. They will require a substantial down payment, unless it is a SBA Loan, and make sure that the collateral is easily liquidable in the event the loan defaults. Examples of collateral to secure a business loan is real estate and equipment that has significant value.