Applying for a business loan can help both starting and growing businesses. It can help you acquire a new equipment for the business, increase supply or to improve your business cash flow. However, there are requirements on applying for a business loan. Banks and lenders also set standards as to how much a business owner can loan, depending on the assets that the business has as well as the capacity of the business to repay a loan.
Who Qualifies for a Business Loan?
To be able to qualify for a business loan, you should be able to satisfy the following criteria:
1. Financial statements including balance sheets, tax returns, as well as profit and loss statements. Your business’s historical information is important in determining whether you can afford to repay a business loan.
2. Details of the asset that you will use to secure your business loan. Generally, you can get as much as 80% of the residential asset that you will use to secure your loan. Sixty-five percent for commercial properties and 70% for rural properties.
3. Your business score should be more than 600 to be able to qualify for a business loan. This can be a personal credit score, or if you are already in business, your business credit score can be submitted.
4. Proof of individual incomes, bank statements, identifications and a few other details about the finances of your business. Your annual revenues are also important factors that determine how much business loan you can afford to pay. A business is required to have $50,000-$150,000 in revenues to be able to qualify for a loan.
5. Start-up businesses that do not have more than a year of historical data can submit a detailed business plan with accurate profit and loss predictions as documentation for your application.
6. Buying an existing business will require you to submit 2 years of historical data of that business, a business plan, and a profit and loss statement.
Increase Your Chances of Getting a Business Loan Approved
There are ways of increasing your chances of getting a loan application approved. You can also secure better deals and interest rates if you follow the tips below.
1. Be honest about where you need the loan for
Inform your loan specialist or bank about the exact purpose of your loan. You will likely get a suitable deal that suits the need that you need to finance for your business.
2. Identify how much you really need
Calculate how much you really need and how much you can afford to borrow. Set a minimum and maximum loan amount target. You can narrow down the lenders that can accommodate a loan within your needs. Working with a loan specialist or broker can make this task easier for you. They will help you locate a bank or lender that suits your needs.
3. Revisit your credit report
Your credit report plays a big role in securing a favorable business loan on your end. Check for items in your file that are already closed and can be removed from your report. Get the most updated report if possible to increase your chances of approval.
4. Get your financial documents in order
If you can afford to, have an accountant prepare your financial documents for a loan application. You can also ask help from your loan specialist to complete your documents. Make sure that all information is correct and up to date.
5. Take the advice of your loan specialist
Your broker is there to help you from the very beginning of your intent to apply for a business loan up until you secure the final documents for your loan approval. Asking for the assistance of a loan specialist can also ensure that your type of business loan is fit and workable for your businesses’ finances.
Knowledge can help you enjoy a pleasurable experience when securing a loan for your business. Be sure to follow these tips or better yet, get professional help from our Intellichoice brokers.