If you are starting a new business or are expanding your current business, you have probably considered applying for a business loan. The business loan process can be complicated as there are certain requirements you need to meet to even qualify to apply.
If you have been wondering what do you need for a business loan, here is a list of the most common business loan requirements.
If you need a business loan, you’ll need to have a credit history and a favorable credit score. Unless your business is well-established and showing a reasonable profit, your personal credit score will be used to determine if you qualify for the loan.
When applying for a business loan, you will need to present a business plan to the lender. Your business plan should be well-researched and detailed about every aspect of your current business, as well as your projections. If you are expanding your business, be prepared to give an updated business plan to the lender.
Use Of Funds
One of the business loan requirements is a statement of the use of funds as lenders want to know what the money will be used for. Depending on the loan you are applying for, there may be strict rules in place regarding how you can use the funds.
Aside from making sure you are applying for the right loan product, lenders want to know you will use the funds wisely and give yourself every opportunity to repay the loan.
Lenders generally will mitigate their risk by asking for collateral on the loan in case you are not able to repay it. Collateral can be almost anything of value, such as easy-to-sell items, receivables, or equipment. If your business does not have any collateral of sufficient value, the lender may require you to put up personal collateral.
You will need to provide a few years of monthly revenue statements to give the lender an idea of your annual revenue. This also shows the lender the revenue trends in your business, such as slow seasons or busy seasons. If your business is not old enough to have built up revenue, you can provide well-researched projections of your future revenue.
A balance sheet is a statement that details a company’s liabilities, assets and shareholder equities for a certain period. This financial snapshot is a great way to quickly show the lender the financial health of your business.
Showing your passion for your business is not something you can type up, print out and hand to a lender but it’s just as important during the loan approval process. Lenders want to know that you have a vested interest in the business and will work hard to make it succeed.
Show your passion and that just might be the deciding factor in your approval.
What Do You Need For A Business Loan: The Bottom Line
While every lender has their specific requirements, this list of common requirements answers the question of what do you need for a business loan. By making sure you can provide everything on this list, you’ll give yourself a fighting chance at approval.
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