By Liam Thomas
Getting a business loan from a bank may not be the easiest way to get some financial help, but it is the most traditional. The good news is that banks give out loans regularly to companies that need them. As long as you go through the required steps and have all the information they need from you. Before you apply, let’s discuss what they will ask of you so you can be prepared as possible.
- Collateral – Even if you have all the information they want and have perfect credit, you may be asked to put up some collateral. Most of the time, this will be something outside the company you are getting the loan for, such as your personal home. If you are getting the loan to obtain a brick-and-mortar location, you may even be asked to put it on the line.
- Purpose – The bank will need to know the loan’s purpose. That means they will ask you what you plan to do with the money if they give it to you. If they feel that the money will not be used to increase the profitability of your business, they may refuse to provide it to you.
- Business Plan – Every lender will ask you for a detailed business plan so they can get an idea of how you run your business and what direction you plan to take it. This plan will need to be detailed, down to the last little bit of information that could affect your business, preferably in a positive way. Your lender may use a business loans calculator to verify all the information in your plan.
- Business Background – The bank will want to know your professional background and how it relates to your business. If you have been in business for many years, it will be easy to show you have plenty of industry experience. If not, they will need to know about your experience that will be the same, or close, as to what you are doing now.
- Credit History – The bank will want to see a copy of your current credit history, personal as well as business. You should always be working on improving your credit number and history, so this should not be an issue for you.
- Accounts – The lender will want detailed information about your accounts receivable and outgoing accounts. If you do not have more money coming in than going out, there is a problem that will raise a red flag for the people at the bank.
- Cash Flow Statements – If you are doing your own accounting work, you will need to print out a copy and take it in with you. If you have an outside person dealing with your books, such as an accountant, you will need to get a copy of your latest statements.
- Financial Statements – The bank will also ask you for the rest of your financial statements. They prefer that they are audited by a professional, but if not, they will still look at them. This will tell them if you can pay the loan back or if you are gambling on the loan to bring you out of the hole.
- Insurance Information – The bank lender will want to ensure that you have insurance policies to cover any damage due to unforeseen events, such as a flood or tornado. They may also ask you to take out a policy on the company’s founders to ensure that they will still get paid if something happens to you.
- Personal Information – Do not forget that even though the loan is for your business, it will still be handed over to you. The lender will want proof that you are who you say you are, that you live where you say you live and that your income is what you say it is. You will need documentation to prove it.
Banks are a little more strict than other lenders, but you can get a business loan from them if you are willing to go through the steps and provide them with what they want. Keep in mind that different banks may ask additional questions. One bank may not be willing to give you the loan you are asking for, and another will. Do not give up if you get a ‘no’ from one bank. Ask another until you find one that will give you a business loan.
