Obtaining a Loan Is Not Always Easy
Everyone is aware that obtaining a small business loan is not always an easy feat to just obtain, some requirements must be met before one can be approved. Some of the things that you will need before you can be approved for a small business loan are listed below.
Documents That Are Necessary to Get a Small Business Loan
There is standard documentation that is required to qualify for a small business loan
- Personal Background Information
you will need to supply some important background information regarding yourself to the lender. Details that you will be normally requested to supply are other names you have gone by, previous addresses you have resided at, your education, and whether you have a criminal record or not. - Comprehensive Business Plan
all small business loan lenders demand you to supply a business plan for your venture along with the completed loan application. The business plan must have detailed projected statements of finances, cash flow, balance sheets, and profit and loss for your company. You can never be nonchalant and all should be typed instead of written. You need to seem as professional as you can. - Professional Resumes
some lenders might ask for proof of your business experience in general and management abilities; this is especially so when an individual desires a loan to start a new business. They must be assured that you can operate a business and they will receive a good return on their initial investment. - Financial Statements
you will most likely be asked to also include your projected financial statements as part of your business plan. Your ideal financial statement should have the balance sheets from the end of the last three fiscal years, cash flow projections which should indicate clearly how much cash flow you plan to create to repay the loan, and your income statements from the last three years which uncover to the lender your profits and losses - Personal Credit Report
the lender will get your credit report during the loan process but you can also get your credit report. It is advisable to get a credit report from some of the major credit rating agencies before you apply for a loan with any lenders. The reason why you need to get your credit report is so that you can be aware of any inaccuracies and blemishes on your credit history. - Collateral
about loan companies the collateral requirements can be widely different. Some lenders will accept no collateral and other lenders will demand lots of collateral on the majority of high-risk loans. Providing accurate and professional financial statements and business plans may not leave you with any worry about collateral however you can gain by preparing collateral documentation and itemizing and detailing all of your possessions and properties and the value of the same. - Business Credit Report
if you already own a business then you will have to create and submit a business credit report for your own business. Similar to how you did with the personal credit report you should go through your business credit report as well and this is very crucial before applying for the loan. - Legal Documentation
although it may vary depending on the particular needs of the loan you are applying for. You will likely be require to submit some legal documentation to the lender including evidence of contracts that might be in place between you and 3rrd parties, business licenses, articles of incorporation, commercial leases, and any franchise agreements that you might have. - Bankruptcy Documents
if you have previously filed for Chapter 7 bankruptcy, then you will have to furnish proof of the same to the lenders.
Common Questions that You Should Prepare Yourself For
Questions will differ from lender to lender but there are a few common questions they will pose such as:
Why precisely are you seeking the loan?
This naturally is a significant question and one of the most asked, they don’t just grant loans without knowing first a solid idea why on earth you’re wanting or in need of the loan.
How do you intend to utilize the money provided by the loan?
Explanation of your plans using the loan will also be require and can easily be demonstrate in detail using a cogently prepare business plan specifying your clear business plans for the future.
Which assets are you planning to buy and with whom will you be buying?
They request this to acquire further information on tools and resources that you will be requiring in your business for success and to get information about any business partners or associates whom you might have.
Do you carry any business debt and if you do who are the creditors?
They need to know whether you already have outstanding debts since this will say a lot regarding whether you can be relie upon to pay back the loan. They will request the names of the creditors and will then verify the extent of debt you are in.
How do you pay on paying back the loan?
This is where you give your brief, business-like financial statement which ought to indicate your future projections and your projected amount of cash which is an essential component of your overall financial statement. It displays precisely how you intend to acquire cash for the business and serves as evidence that you can acquire the funds required to service the loan.
Can you post some kind of collateral?
Collateral is something that may be a valuable resource you can use when you are applying to get approve for a loan. The lender will be intereste in knowing whether you have some valuable item that can serve as a stronger pledge that you will repay the loan, such as a house, a vehicle, or other valuable personal items.
Questions You Should Ask the Lender
Do you have sufficient funds to cover my business requirements?
You should ensure that the bank on which you have decided to seek your small business loan is capable of helping you. Always be slow in making the decision on which bank to use.
What are the risks associate with the lending process?
This is one of the most crucial questions that you should ask the lender. Like any loan transaction, there are risks involve and you should know what those risks are. A good example would be that if you decided to use some form of collateral, you would want to know the terms of the agreement. You don’t want to lose your house or other valuables because you weren’t well inform.
What is the typical size of the loans that you usually lend?
This will provide you with a better concept of whether or not it is possible and probable that the money you require can be provided and will provide you with a better concept of your approval chances too.
How long does it normally take to complete the loan process?
You want to ask this question so that you know the time it takes for a loan to be process is different for different loans and banks. It takes 2 weeks to process some loans and 6 weeks to process other loans. Be sure to find out what your overall waiting period will be.
Are there application fees or any other fees associated with the loan process?
This is a question that is extremely important to pose. You don’t wish for any surprise that becomes financially regrettable.