Guide to Applying for a Business Loan | Fora Financial Blog
Close
Step-By-Step Guide to Applying for a Business Loan
January 26, 2018
Guide To Applying for a Business Loan

Step-By-Step Guide to Applying for a Business Loan

January 26, 2018
After completing considerable research, you’ve found that a business loan is the best financing option for your business. Still, the process isn’t over yet. You must apply for the loan and get approved!

To improve your chances of qualifying for a loan, consider the steps in this post.

1. Ask Yourself These Questions First

Before you apply, you should consider why you’re getting a business loan. Are you planning to expand? Or perhaps you need additional cash flow, or to pay off debts. Knowing how you’ll use a loan can help you determine how much you’ll need, which can be helpful for a lender to know.

Secondly, you should ask yourself if you’re prepared to take on a business loan? A loan means cash influx, but it’s a debt until you pay it back. You’ll have the best chance of landing a loan when your business is performing strongly.

Lastly, have you considered all your options? Compare multiple lenders, and consider each of their potential offers before you apply.

It will take some time, but search for terms and conditions that best fit your business. Then, do your due diligence and read reviews from other borrowers about each lender. This will help eliminate any bad apples, and allow you to create realistic expectations of your chosen lender.

In addition, make sure your industry qualifies for the loans you’re leaning toward. Some fields, like construction companies, clinics, and non-profits have restrictions from both the federal government and lenders.

2. Compile Business and Personal Information

To start, ensure that your business plan is fleshed out and explains how you’ll utilize a loan. In addition, you should be prepared to provide information relating to your business’s figures, like year of inception, last year’s profits, and number of customers.

Every lender’s requirements will differ, and you may have to submit documents like a personal statement with a detailed background section, personal credit report, criminal record, previous legal names, previous addresses, and more.

Gather your business licenses, permits, and certifications. Anything that proves your ownership, like Schedule Cs, articles of incorporation, share certificates, or articles of organization are all good to have.

3. Organize Your Financial Documents

When applying for a loan, most lenders will require financial documents such as accounts receivables, balance sheets, bank statements, multiple time-span profits and loss statements, and tax returns.

In addition, you should check both your personal and your business’s credit scores. Unless you have a business credit score over 600, you may check out bad credit business loan options. These aspects of your application can affect the terms and conditions surrounding your final loan offer.

Next, outline any debt you have, as they could affect your terms. A business debt schedule will work well for this: it’s a document that outlines all outstanding debts, credit amounts, monthly payment, and other comments.

If your business owns or rents any property, include that as a rent/real estate schedule with your debt schedule. Include percent ownership, tax payments, monthly payments, and anything else that would help inform your application. In addition, it is typical that brick-and-mortar businesses will be required to furnish a landlord subordination form, which assures the lender that the tenant can stay on the landlord’s property during the lease agreement.

4. Complete the Application

It will take time and effort to organize required paperwork, but package it into a nice file. Show the lender that you are conscientious and taking the process seriously. Alternatively, the lender may prefer that you submit an online application.

On your application, be honest about your debts, past businesses, and any other relevant information. Don’t give the lender any reason to doubt you; they’ll reject you in a heartbeat. In addition, it might be worthwhile for you to have a colleague or business partner help you complete the application, so that you don’t miss anything.

5. Wait for an Answer (And Try Again if You Don’t Succeed)

Some lenders can inform you about your qualification status within 24 hours, but many traditional lenders will spend two to six weeks analyzing your application and going through the underwriting process. You’ll probably need to provide more documentation along the way, so check in once a week regarding your application status. Ultimately, the waiting period depends on your chosen lending institution and application strength.

Reapply if you didn’t get any offers, but remember that your credit score can be affected by inquiries. Before applying again, you should review the questions featured at the beginning of this post to identify any possible weaknesses impeding your ability to secure a loan. Ask the lenders for feedback on your application, and use it to improve your approach when re-applying.

Lenders want to loan money to businesses they think can pay them back. Don’t get disheartened if you don’t succeed the first time around. With some hard work and due diligence, you can greatly improve your chances in the future.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Yahoo Gemini