Demystifying The Business Loan Application Process

A business loan application is a serious undertaking. Not every business-minded person who plans to get a loan application is approved, but you can help yourself by knowing the exact procedure and providing the necessary criteria and requirements prescribed.

Recognizing the Fundamental Credit Factors Required in a Loan Application

Your credit merits are thoroughly examined by the lender before your business loan application is considered. To determine whether your application has the possibility of getting approved, check the following credit factors which are imperative to securing a loan:

  • you have equitable amount of money invested in the business
  • your current cash flow standing and projection is satisfactory
  • your current assets are sufficient enough to keep the company operational
  • you have adequate collateral to secure the loan payment
  • your managerial resourcefulness and capacity is excellent

Securing Prerequisite Documents

A business loan application is not complete without the necessary documentation required. Each paper attached along with the application is inspected and evaluated by the lender. Your documentation is another determining factor of your loan's approval. Here are the basic credentials you need to prepare:

  • overview of business profile
  • details of loan request
  • details of collateral
  • financial statements of business
  • financial statements of owners with at least 20% of business ownership

Writing a Loan Proposal

The way you write and present the proposal influences the denial or approval of your business loan application. Your proposal serves as a combination of the owner/s and the business' resume. It should contain every detail of information a lender wants to find out like business description, business and personal financial statements, balance sheet, lists of collateral, articles of incorporation, repayment plan, partnership agreement and details of existing contracts. To make sure you have all the information required, you can request for a proposal format that your lender applies. Most companies have their own standard format for this kind of loan.

Preparing to Answer Questions From the Lender

Get yourself prepared and ready to answer questions from the banker regarding your business loan application. Studying, understanding and familiarizing your business plan well will not only show your self-confidence, but most of all demonstrates the faith you have in your proposal. Such attitude is surely a plus. Few of the basic questions your lending company asks are:

  • What's the purpose of the loan?
  • Is the business stable enough to repay the borrowed money?
  • What are your repayment plans?
  • How well do you know the market your business is into?
  • How are the sales going?
  • Requesting Assistance From SBA Loan Programs

The Small Business Administration (SBA) is a US-government agency that assists individuals in their business loan application with commercial lenders. SBA serves as the borrower's guarantor and not the lender. Most banks and some non-bank lenders participate with SBA's guaranty loan schemes. With the assurance a lender receives from the government, it is likely that your proposal will be taken into consideration. Seeking assistance from this agency through its various business loan programs makes it easier for you to obtain an approved loan rather than doing it all by yourself. For more info about SBA's loan programs, visit: www.sba.gov.