10 Business Loan Requirements You Need to Know
So you need a business loan. Hey, that’s a good thing! Your business is growing. It’s time to get the capital you need to keep the progress going. But you might find yourself a little bit stuck. What are the business loan requirements ahead of you? Maybe you don’t even know the first step of what you need to do to apply for a business loan. Before you apply, get yourself organized and informed.
It will make the whole process seem much less overwhelming. Then you’ll be ready to keep moving your business forward. Some information might seem obvious and straightforward, but you still need to know it in order to apply for a loan. Other things might be something you didn’t plan for. Either way, you’ll be ready to apply for your business loan once you know all things.
Business Loan Requirements: The Loan Amount
Yep, you’re going to need to know your loan amount. Some lenders have a loan ceiling that you’ll have to consider if you’re going to be borrowing a large amount. Depending on the amount of your loan, you’ll have different terms, so the lenders are going to want to know the exact amount you’re looking for going in.
The Loan Purpose
Another point that might seem obvious, but is important nonetheless. Lenders will ask what you’re going to use your loan for. They’ll want to know what equipment you’re going to buy with the money, so that they can help plan out your loan and see which one is right for you.
Your Business’ Credit Score
Your credit measures how well you have paid back your loans in the past. It can also be affected by a number of factors, like the size of your business, the industry you’re in, and the revenue you take in. Some people are only aware that they have a persona credit score, and not that their business also has one as well.
The Age of Your Business
The lender will also likely ask you how long your business has been in operation. Businesses that have been around longer have a higher likelihood of qualifying for a business loan. Two years and up is usually a safe bet that you’re not going to run into problems. A business younger than that might need to show the lender a business plan to prove that they are going to be able to achieve long-term success.
Your Business Plan
Speaking of your business plan, it’s a good idea to have one ready when applying for a business loan, even if your company is older than two years. It’s not always required by all lending companies, but it’s still not uncommon for a lender to ask for it. If you’re scrambling when they ask, it’s going to give a bad impression of your business. It should also be up to date and include statements from the last two years.
Business Permits
You likely had to acquire a permit of a license of some kind, depending on your industry, before starting to operate your business. When applying for a business loan, lenders will want to see your license to prove the legitimacy of your business.
Proof of Collateral
If you’re going to be unable to pay your loan back, lenders want to know what kind of collateral you have on hand so that you can pay them back if you default. Collateral includes equipment, tools, real estate, inventory, or anything that can be used to pay back the amount that you owe.
Bank Statements
Lenders will, unsurprisingly, want to carefully look at your business’s financial affairs. They’re checking to see if you will be able to pay back the money that they are lending you, including interest. Looking at bank statements is the most common way to do this, and will be able to prove that you are indeed able to pay back the money while still operating your day to day business. Prepare up to four months of bank statements at a minimum.
Tax Returns
Tax returns will also help the lender be able to determine if you will or won’t default on your loan. It’s another part of examining your finances closely. And it won’t just be tax returns for your business – it will be your personal tax returns. This way, they will see if you’re reliable.
A Copy of Your Lease
If your business is brick and mortar as well as online, you’re going to need a copy of your commercial lease to show to your lender. This proves that you’ll be using the space you’re in for the time that you’re borrowing money. It also proves you’re not at risk for getting evicted.
So, are you ready to apply for your business loan? No matter if you’re a pro who’s done it all before or applying for the first time ever, TopMark Funding has your back. We can walk you through all the steps of the process and answer any questions that you might have, whether they’re big or small. We also will help you with detailed expertise on all business loan requirements. We’re here to help you have the smoothest, most comfortable application process you can imagine.
