Easy Tips to Get a Business Loan
Ready to apply for a business loan? Whether or not you get the loan depends on whether you can convince the lender you’re a good risk, and that will be based on the documentation you provide. Here’s a run down of the items most lenders will need to see.
Access to capital is an ongoing need for growing businesses. Whether you want to hire several more employees, open a new location, increase production, or develop new products, a business loan can provide your small business the money it needs to expand.
How successful you are at getting the loan will depend on how successful you are at convincing a lender that you’ll be able to repay your loan on time. That decision will be based on a number of factors including the business’ income and credit record, your business plan, the nature of the business, your industry, the business experience of the owner(s), the personal credit of the owner(s), your collateral, and the lender you choose.
To evaluate those factors, lenders will ask you to complete a loan application and provide a variety of information and documentation. Although the specifics will vary from one lender to another, you may need to provide some or all of the following:
Loan request details:
• Why you want the loan
• How much you need
• How the money will be used
• Amount of time needed to repay the loan
• What other business debts you have
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This would include a description of the business, description of the products and services, marketing projections (and how you plan to achieve your goals), resumes of the principals in the business, and financial projections
Business licenses, incorporation documents, patents, commercial leases, franchise agreements, or other legal documents related to your business.
Profit and Loss Statement (also called an Income Statement) for an existing business
Cash flow statement
Accounts receivables and payables reports (for existing business)
Both business and personal tax returns from the last three years may be required.
The lender may require credit reports both for the business (if it’s already established) and personal credit reports for the owner(s).
Collateral is something of value that can be used to repay the loan if the business defaults on the payments. That something of value would be something the lender would be able to sell to recoup its losses if the business can’t pay off the loan. The “something” might be inventory, equipment, bank accounts, or even your home.
Gathering all of the above information and documents before you approach a lender, will help you speed the loan application process. It should also help you get a clearer vision of your business needs and the businesses’ ability to repay the loan.