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How To Get A Business Loan – Complete Guide for You

How To Get A Business Loan – Generally, people need a loan to start a business. And want to know which type of documents required applying for a business loan. 

Every bank has its own requirements and many documents are mandatory across the lenders. Before applying for a loan keep in mind the basic requirements to keep in mind.

Business sometimes needs a loan to meet their regular operations until they have sufficient amount to cover their working capital.

How To Get A Business Loan

How To Get A Business Loan

Loan Application

Many banks have invested in the technology that allows online small business loan applications. On the other hand, many banks still require a borrower come to their branch and fill the paper application to get the money.

Applying for loans at multiple banks/institutions can be harmful as each one wants your business credit history. A bad credit record decreases the chances of getting funds as the banks interpret it as a sign of desperation that you are shopping around.

Personal details

The bank needs the basic personal background information data includes your current, previous address, aliases, criminal, educational etc.

Plan of business

If you are looking to secure a small business bank loan must have a ready business plan. The document provides a detailed explanation of what a business is and what are the plans for the owner to take it.

A business plan must include the following

Executive Summary

A single-page explanation of the business, its objective, operations, marketing efforts and revenue model is a key factor.

Business Description

What is the nature of your business? How can it earn the profit?

Local Market and Competitive Landscape

You need to describe where a business is based and who its target audience is. To check the competition as objectivity as possible and then describe how you differentiate your activities.

Product/Service

Explain the details of your product or service works. You need to highlight what makes your business that can attract customers.

The Staff of your company

Describe your staff, their knowledge, and experience.

Financial Data

Make a detail of break-even analysis, a sample balance sheet, cash flow projection and profit-and-loss account.

Investment details

Lenders want to know how much money the owner is putting into the company. If you are not willing to invest much of your own sources into it, investors will be wary about it. Provide an estimate of sale/revenue and type of return investor is expecting.

Appendices

Give the details of research conducted such as graphs, charts. Logos, other images etc.

Credit report

A lender will need your credit report this is the part of application process. You must obtain a credit report from major customer credit rating agencies before submitting their loan application to the lender.

Inaccuracies on your credit report can hurt your chances of getting a business loan. So try to clear the discrepancies before starting the loan application process.

Business Credit Report

If you are already doing a business and ready to submit the credit report for your business. It is vital to review your business credit report since beginning the application process.

The score of 650 is considered a good score. In case the credit score is 600 or lower, you may face difficulty in securing finance from a traditional lender such as a credit union or bank.

Income Tax Return

Bank requires applicants to submit personal Income Tax Returns and Business Income Tax Returns for the last three years. Providing business tax returns for a business is hard, especially in the case of a new business. In this case personal return carries a lot of weight.

Financial details

Bank typically requires profit and loss documents, balance sheet and cash flow statement. Many lenders need one year of personal and business bank statement to be submitted as part of your loan package.

Collateral

Some banks require collateral as loans involve a high degree of risk will require substantial collateral. The lender wants to know the cost/value of the personal/business that will be used to secure a loan.

Legal Documents

  • Bank requires borrowers to submit the following items
  • Articles of Association
  • Franchise Agreement.
  • Business Licenses and registration required to conduct your business.
  • The copies of contracts you signed with third-parties.
  • Banks both large as well as small have similar lending criteria. Many banks don’t give the loan to a startup business because they don’t have three years of Income Tax Returns.

How To Get A Business Loan

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