If you’re considering applying for a business loan from a financial institution, it will pay to be prepared.
Experts say to expect close scrutiny of any loan request, because just as you are careful about the way you run your business a financial institution will protect itself by ensuring you’ll be able to repay a loan. Lenders also will want to know specifics about how you are going to use the money and they will make sure that you are qualified.
Here are some tips to help you get ready for the process:
- Schedule an appointment with a business banker and let them know that you’d like to discuss a business loan. Ask them which documents you should bring to the meeting.
- Don’t wait until you are in dire straits. The process of determining your creditworthiness can take weeks, so don’t expect to walk out of your financial institution with the funds the same day you apply.
- Be specific about how much money you want to borrow and what it will be used for. Don’t hesitate to talk with experts beforehand, such as your accountant, financial advisor or others who could be helpful.
- Loan officers will see if you have assets, financial reserves and personal collateral, such as your home, so you’ll be able to cover the loan.
- Bring your business plan.
- Be prepared to show business and personal financial details.
- Bring business financial statements and past corporate tax returns.
- Have insurance information available.
- Check your business credit report and make sure it is solid or work to improve it.
These types of loans tend to be for established businesses rather than startups. Some experts recommend that you start by talking to a business banker at the financial institution where you have your business account. Having a strong relationship with your bank can help when seeking advice and financial planning.
They might even discuss other options you could qualify for such as a small business line of credit or a credit card with cash back or rewards programs. Another option, if you qualify, could be a government-backed Small Business Administration loan that might have more attractive terms.
Just keep in mind that while there are no guarantees, you’ll increase your chances of securing a loan by coming in with a healthy business and all the details requested by the financial institution.