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 And PUBLISHED On July 26th, 2020

Many people who eventually want to open up their own businesses and work hard to save money to fund their new business.

In this article, we will discuss and cover How To Get Approved For The Right Business Loans For Your Business.

Before You Apply For A Business Loan

What to do before applying 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 lender why the borrowers will be successful. Need to convince business/commercial lenders why the lender should lend the 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 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 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
  • Assets
  • Reserves
  • 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 of personal and business tax returns

Collateral On Business Loans

Why is securing business loans important

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 an 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.

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