Business loans are the perfect way to push your business the extra mile or to finally execute the business expansion that you have been meaning to do for quite some time. More times than not, people fail to acquire the business loan they need or the lender simply refuses to lend the amount of money that a person has applied for, it is important to know the why of this frequent occurrence. The prevailing perception among loan applicants is that their eligibility relies solely upon their personal or their business credit code however that is not the case. There are many more factors that the lenders look into before granting a business loan to an applicant, which are not related to the applicant’s or the business’s credit history.
Purpose for availing the loan –
This is something that we all know and yet we fail to recognize its importance in the process of availing a business loan. Most of the times the purpose of the loan stays ambiguous and vague, for example one can state that he or she will use that money as working capital then it is advised that he or she be a bit more specific about it, instead of only stating that the loan would be used as working capital, the applicant may also add that he or she will use this money to pay vendors and rent. Similarly if one wishes to use that money to buy new equipment, the kind of equipment should be mentioned. This additional information will help you and the lender to figure out what kind of a loan would be better suited for you and will give you more probability of securing that business loan.
This might come as a surprise to some but it is true. The industry you belong to may affect your eligibility in getting a business loan. Some lenders will not lend money to higher risks industries or industries that would put a dent to their reputation like the fire-arms industry. Various lenders have various issues with different industries, only way to know for sure is to enquire about each lender’s policy regarding this and then apply for the business loan accordingly.
Availability of Balance Sheet-
Balance sheet is like a picture of your business’s health. It is one of the basic small business loan requirement, as it stands as a testament of your business’s health. A balance sheet shows the lender your liabilities and assets. Lenders would surely want to know if you have enough assets to cover the repayment of the loan under the specified time. Most lenders would want to see your last two year’s balance sheet. So, in order to increase your chances of getting a business loan one should keep their balance sheets always handy.
Appropriate License of Permit –
The exact requirements will vary depending on your industry and the state you operate in. However, you can be sure that your business license will be on a list of business loan requirements—lenders will want to see your proof of ownership and license to operate a business.
Sometimes, even freelancers and home businesses need a permit. And depending on the size, location, and type of business, requirements can include fire permits, sign permits, environmental, sales tax, and health department permits.
Proof of Collateral –
Collateral is property that you’re willing to lose if you can’t repay your lender—whether that’s real estate, equipment, or even inventory you use to make your products. If you falter on the repayment of loan, the lender can sell off the collateral and apply the proceeds to the loan, to recover the amount.
If you’re applying for a Business loan, lenders will want to know what kind of collateral your small business has and its value. A professional, certified appraiser can make sure you know the true value of your collateral for equipment financing the collateral is the equipment itself. Thus, this idea of collateral should be kept in mind while applying for a Business loan.