How to prepare a business loan application
Most business owners find that at some point in the lifecycle of their business that they need to apply for a business loan. While in years past the business owner could simply walk into their local bank and after a short conversation and a handshake with the bank manager leave with business loan approval. Today, business loans are processed quite differently. The business owner will have to go through many different steps with an emphasis placed on the application for the business loan. The bottom line is that how well you prepare your business loan application can not only mean the difference between getting the loan and being denied but also what conditions and terms are set for the loan. However, the good news is that there are things that you can do that will make a big difference. Here is what you need to know about how to prepare a business loan application-
- Anticipate potential problems-The first step in preparing a business loan application is to anticipate potential problems. If you can consider the problems that may come up and deal with them before you are in the loan application process you are far more likely to be successful. You will need to carefully consider all of the potential pitfalls that can confront you during the loan process such as: low credit scores, lack of collateral, having a business plan, and any other factors and begin working on them long before you even fill out the business loan application.
- Manage your credit beforehand-Another step that you take in the business loan application process is to pull your credit report. You should pull both your personal and business credit report. You will need to go over them both in detail and make sure that all of the information that is reported is accurate and up to date. Do not make the mistake of not pulling your personal credit report since your lender will be interested to see how you manage your own personal credit. Keep in mind that if you do find problems on either credit report it can take time to fix it so you should plan to do this well in advance of applying for the business loan.
- Know what you will need and what it will cost-Another important step in preparing for a business loan application is to determine how much money you will need, why you will need it, and what the cost most likely will be. Your lender will not be impressed by guesswork or vague numbers when they ask you how much money you need. You should have a clear idea of exactly how much money you want to borrow and what you will use it for. In addition, you should take the time to educate yourself about current loan interest rates and other fees. This way you will be able to tell if you are getting the best possible deal on your business loan. These numbers should be readily available online or you can get them from the bank that your business banks with.
- Present a well written and thoroughly researched business plan-Finally, you will need to take the time and make the effort to put together a well researched and well written business plan. Keep in mind that your business plan will be the first impression that your potential lender has of you and your business. You want to make sure that you have written it in a way that makes your lender feel confident in your abilities to not only manage the business loan but make your business a long term success.