How To Get Approved For The Right Business Loans For Your Business
This BLOG On How To Get Approved For The Right Business Loans For Your Business Was UPDATED On December 17th, 2017
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 Administration, 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. Need to clearly state all the qualifications and experience of all partners. The business plan and resume should show the business loan lender why the borrowers will be successful. Need to convince business/commercial lenders why the lender 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
- I should also include 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 feel more comfortable with a personal guarantee and/or collateral.
- Whether the guarantor of the business loan will be an owner operator or a passive investor will need to be address
- Also, lenders 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 following:
- Personal Guarantee
- 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. Most business lenders want the borrower to put skin in the game. That means large down payment, reserves, personal guarantee, and collateral.
- They will require a substantial down payment, unless it is a SBA Loan
- Personal guarantee and collateral is important
- Lenders will evaluate on how liquid the collateral is in the event if the business fails
- Examples of collateral to secure a business loan is real estate and equipment that has significant value