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Using A Checklist For A Business Loan
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Business loans aren't based fully upon an individual's creditworthiness and his or her background; however, most lenders will want to know some details about the applicant's history. Essential details will include previous addresses, education history, and any other businesses with which a person has a history (through ownership or as an employee).
2. Standard resume
A resume isn't always required during the business loan process unless an applicant has never run a business before and the loan is for a new business idea. A borrower who can boast training in business (such as earning an MBA) will want to share this information with a lender to improve his or her likelihood of receiving a loan without significant real-world experience.
3. Traditional business plan
The cornerstone of business funding is a business plan, and virtually all business loan applications will require a standard business plan. By providing a superior level of detail and projection within that business plan, an applicant or small business stands a good chance of gaining approval for a loan, even if the plans include some risk. It is necessary that the business plan is an updated document and isn't an old one from a few years ago when a business first opened its doors.
4. Credit reports
For an existing business, the loan application will require a credit report based upon the financial history of the business. Just like an individual credit report, a business credit report will provide information like payment history and the accounts held under the business's name. For a startup or new business, a personal credit report may be required of the borrower.
Sometimes a commercial loan may require collateral while other loans may not. In most cases, commercial loans for real estate will require collateral, but the collateral offered is often the property which is going to be purchased. A small business may also put up current property (perhaps large equipment) as collateral to obtain a low interest rate or favorable loan terms.
6. Legal status information
All the basic information defining the company's legal status will need to be included in the application process. Making copies of the documents in advance of the loan application saves a lot of time. Legal documents commonly required by lenders may include a valid business license and local registration info regarding business operations. A lender may also be interested in any other loans and agreements currently in play, such as commercial leases or equipment loans.
Although it seems as though a small business loan requires enough information to create a novel, each document a person obtains before the application process shortens the overall length of time the business must wait for funding. A business owner (or hopeful startup owner) must be prepared to answer vital questions such as how the loan will be repaid, how the loan will be used, and how any current debt burdens might impact the chances a loan would be repaid on time.
Coming to a lender with everything ready for inspection tells the lender that the borrower is serious about the venture. A well-prepared borrower may even qualify for friendlier loan terms, so bringing as much information to the table as possible is always a terrific investment of time.
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