This article will detail what a typical bank will expect from you when applying for a business loan. After reading this, you may probably determine if you’re ready to apply for a business loan and expand your resources.
Purpose of Loan and Business Plan
A business plan is the first step to convincing your lender. Include your company’s goals, competitors, past and projected revenue, expenses, market analysis, and how you intend to grow the business.
Credit History
A lender wants to know that you’re financially responsible. Therefore, if your credit report is less than stellar, you may want to wait a little while and build up your credit score before applying for the loan. Many lenders may require bank statements and tax returns for the previous year, so you should plan a year ahead of your application.
Financial Statements
As a loan applicant, you should provide both past and future financial statements.
Present your cash flow statements, income statements, and balance statements for the past three to five years. Create projections for the next few years, accounting for the seasonal fluctuations in your business and how you will use the borrowed funds.
Collateral
Business loans often require secured collateral — an asset a borrower pledges to the lender for the span of the loan. Collaterals minimize the risk for the lender. If you default on your loan, they can seize it and repay the loan.
The amount of collateral varies on several factors, such as your credit rating and the nature of the collateral.
Cashflow
A cash flow gives the lender a picture of your business’s ability to repay the loan. It shows how your business brings in enough money to cover all business expenses and debt, including the one you’re applying for.
During a business loan application, a lender may evaluate your business cash flow using your most recent tax return.
Ready to Apply for a Loan?
Knowing the requirements before applying for a business loan matters. You can easily understand, plan and make necessary adjustments to ensure that you will get approved.
Do you feel that you are now ready for a business loan?
If it’s a YES, Unicapital can definitely help. Whether you’re a start-up or an established company, Unicapital offers several types of business loans that will suit your business.
