Applying for a Business Loan
Are you thinking about applying for a small business loan? Are you prepared to provide everything that’s required of you?
Although applying for a small business loan can be a tedious process, it’s much more efficient than it was in the past. With the help of the internet, it only takes a few minutes to review a loan application to better understand what you need to get started.
Here are five questions you should expect to answer when completing a small business loan application or communicating directly with a loan officer:
1. How much money are you interested in borrowing?
Don’t go into the process without a clear idea of how much money you want to borrow. Doing so brings into play the potential for borrowing more or less than what you actually need.
2. What type of term are you interested in?
Maybe you want to repay your loan over the course of 12 months. Or maybe you’re more interested in a longer term, as you want to secure the lowest possible monthly payment.
There’s nothing wrong with considering more than one term, but you should at least have an idea of what you’re looking for.
The primary benefit of a short-term small business loan is the ability to save money on interest.
Conversely, a longer term will result in more money paid in interest, but your monthly obligation is much lower.
3. Can you provide proof of income?
Lending institutions only want to do business with borrowers who can afford to repay their loan based on the terms and conditions.
This is why they’ll ask for proof of income early in the process. Different lenders require different types of proof, so ask what they need.
4. Can you provide tax returns?
This goes along with point #3 above. Tax returns give the lender a clear idea of how money revenue your company is generating, as well as your personal income.
Tax returns play a big part in every lending decision, so you should expect your lender to request copies of the last one to three years.
5. Can you provide six to 12 months of bank statements?
Along with proof of income and tax returns, bank statements provide your lender with a high level overview of how you manage your money.
You can print your bank statements online or visit a local branch for assistance.
Along with the above, your lender may ask one other important question: how do you plan on using the money?
This should be a simple question to answer, as you don’t want to apply for a small business loan unless you know exactly how you’ll use the money.
You should expect to address these five questions when applying for a small business loan. Once you provide the lender with all the information they need, you can sit back and wait for their decision.
If you receive an approval, review the terms and conditions of the loan, ask questions, and decide if now’s the time to borrow money.