Business Loans

How To Get Approved For The Right Business Loans For Your Business

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article On How To Get Approved For The Right Business Loans For Your Business

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

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
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

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.
Business Purchase Loans For Start-Up Companies are available. However, lenders often are limited in taking on risks. Lenders love lending money to stable businesses. However, start-ups are often risky. Lenders often look at the resume and experience of the entrepreneur. Was this the first business? How many businesses does the entrepreneur have started and how was the outcome?

“Buyers are looking for a great deal. Sellers are looking to get the highest price: a strategy that accomplishes both.”

What is the total cost a Buyer really pays for a business?  Let’s refer to this total cost as “opportunity price”, this is not just the price the buyer pays for the business but the “total repayment costs in terms of gross, or before-tax, income … the purchaser will be required to earn to make the after-tax payments.”

Example Of Business Purchase

Example: The cost of the business is $100,000; the purchase must earn a gross income of $180,000 (assuming a combined 45% tax) in order to have the $100,000 after-tax income to purchase the business.

As for the Seller, they may want the highest price possible. But the market will dictate what a buyer is willing to pay and what the business purchase is worth.

Tax Strategy On Business Purchase

Through a specific financial and tax strategy, a Seller can net out their desired profit from the business, while at the same time provide not only a very competitive price to the buyer but also an immediate tax deduction, thereby reducing the purchaser’s total cost even further.

Business Sellers

When it comes to selling a business, through these time tested strategies, a business seller can end up getting top dollar for their business while simultaneously reducing their tax liabilities and providing a great deal to the business purchase buyer.  A WIN-WIN for everyone, except maybe the taxman.

This is also a great strategy for Medical and Dental Professionals looking to increase the value of their practices. If you are looking for a doctor, dentist, veterinarian, podiatrist, chiropractor, or a licensed member of the healthcare community, please contact Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at The team at Gustan Cho Associates can assist on the best route to take in qualifying for commercial loans plus business purchase loans for members of the healthcare community.

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