It takes a lot of
money to run a business. Rent, equipment repairs and purchases, and payroll are
some of the many expenses you need to consider. Without enough working capital,
it’s safe to say that entrepreneurs won’t be able to pay for any of these. For
this reason, many entrepreneurs apply for quick business loans even before the
need arises.

However, applying
for small business loans from traditional lenders is not a walk in the park.
Banks are wary of small businesses because of the risk they carry. Nowadays,
traditional lending companies like banks often require extensive documentation.
Alternative lenders, on the other hand, don’t need too much paperwork, but
they’d want to know your company’s current financial situation.

Although financing
companies may not ask for the same requirements from borrowers, they do require
them to submit the most common ones. Here’s a breakdown of the things you need
when applying for a business loan:

1. Credit Score Report

A lot of business owners think twice when it comes to borrowing money
from lenders because of sky-high interest rates. But for clients with good
credit scores, lenders are usually willing to offer flexible rates. It’s
important to note that financing companies usually ask for both personal and
business credit scores. However, since some businesses usually still don’t have
enough credit rating, banks and other alternative lending companies will look
at the owner’s personal credit scores, instead. 

Lenders usually require their clients to have a credit score of 580 or
more. But if your credit score does not qualify for the specific business loan
you’re aiming for, other loan options are available for borrowers who don’t meet the standard credit score
requirement.

Another
important financial requirement is your company’s balance sheet. This
document shows the company’s liabilities, assets, and shareholder’s equity,
giving lenders a clear picture of how well the business is going. The balance
sheet is usually calculated at a specific time in the business, i.e. during the
start-up phase, then monthly, quarterly, or annually.

A balance sheet helps lenders determine whether the owners
will be capable of fulfilling the full payment within the agreed period. So, to
qualify for business loans, lenders usually require business owners need to
provide a year-to-date balance sheet.

There is always a risk involved in the lenders’ side when they let other
people borrow money. But with collateral in place, lenders would be able to
reduce the risk they face. Collateral is a hard asset that a borrower presents
to the lender to act as a guarantee in case the borrower fails to meet the
repayments. While not every borrower is required to present collateral, it’s an
essential one that will help you get a good deal from lenders.

Not all financing options require borrowers to present collateral. But
if they’re planning to apply for a term loan like those offered by the SBA,
lenders will need to ask their clients to present collateral. That is why
before you submit your loan application, you need to be sure what type of
guarantee you can offer and how the lenders handle those types of collateral.
This way, you’ll be assured that comfortable with the loan agreement you and
the lending company come up with.

Bank statements allow lenders to determine how much they can lend the
borrowers and gauge their capability to repay the loan. It also shows lenders
how well you can manage the cash that comes into the business’ or the owner’s
account. If you’re not a sole proprietor of the business, lenders will usually
ask for all the owners’ bank statements and evaluate each.

With that said, lenders typically ask their clients to present bank
statements within the last four months. This will allow them to take a closer
look at the finances that your company and serve as proof of your company’s financial
history. If you’re planning to apply for an SBA loan, expect to be asked for
more bank statements since they’re usually stricter than traditional banks or
lending institutions.

A business plan is an invaluable tool that you need when applying for a
business loan. Lenders want to know how entrepreneurs use the financing they
obtained to grow their business. And the business plan will tell them that,
exactly.

The business plan will serve as the foundation and roadmap of your
business. While banks don’t necessarily need a long one, it should contain all
the necessary information relating to the business operations. With that said,
a good business plan should include the marketing strategies, goals, products, resumes of key managers, and
most importantly, the company’s financial reports.

Learn More about Quick Business Loans for Your Business

Business loans are
a necessity when it comes to running a business and applying for quick business
loans. Having adequate working capital is essential if you want your business
to succeed. However, without quick business loans, entrepreneurs will
eventually exhaust their working capital and use up all their resources. If
left unaddressed, this will force them to file for bankruptcy which leads to
business closure.

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