How to Get a Business Loan From a Bank
by Shanika Chapman
1. Conduct research to ensure that you fully understand the cost requirements of the inventory, equipment or assets you intend to procure for your business. You’ll want to ensure that the loan amount that you request will cover the business investment. Have a specific number in mind; being vague about the loan amount will look unfavorably on your business ethos.
2. Determine the amount you need and what you need it for. Create a business plan that details how you intend to spend the money. Include your business goals, potential obstacles and how you intend to overcome them, and details about your management team.
3. Collect and update all business financial sheets, such as balance sheets, profit and loss statements, and cash flow statements. Collect at least two years of tax returns.
4. Obtain a copy of your credit report to ensure that your report is free of any errors or incidents that may have lowered your FICO score. Banks consider your personal financial information when extending business loans. Resolve any discrepancies prior to applying for your loan.
5. Determine what you can put up for collateral, if applying for a secured loan. Acceptable business assets typically include real estate, operating equipment, business vehicles or you may be eligible for
a CD backed loan. Unsecured loans are much harder to get. You can up your chances for obtaining an unsecured loan with a high personal net worth and a balance in those accounts associated with the bank you are applying for the loan.
6. Shop around. Pay close attention to the terms. Recognize the interest costs and confirm that it is worth it.
7. Apply online, when ready. Many banks allow you to apply online, making the loan process much more efficient. Once you have applied, an officer will respond within a day or two and request that you send in the required financial documents. Once the lender receives the documents, it typically makes a decision within a few days. The entire process may take less than two weeks.
- Balance sheet
- Tax returns
- Cash flow statement
- Profit and loss statement
- Business plan
- Collateral or high net worth
- Upon approval, you will need to develop a loan repayment plan.
- The more information you have about your business, the better your chances of securing a business loan.
- A loan is a lump sum of cash and typically comes with a fixed rate. Lines of credit are revolving and typically come with a variable rate.
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Category: Bank loan