Loan Application Checklist
July 15th, 2007 Filed Under General
Applying for commercial financing? Use our funding checklist.
A small business owner needs to properly prepare their business to find capital through banks, specialty lenders or investors. It’s no secret the average small business owner is going need to obtain financing to sustain the cash flow these days. Here are some helpful guidelines to follow before you start seeking funding for your small business. To prepare yourself before pursuing a loan, a small business owner should have answers to the following questions:
How is your personal credit history?
Potential lenders will look at your personal credit history to gauge your ability to repay a loan. A shaky credit background, personal bankruptcy, slow payments, collections, etc., will make it much more difficult to find money. Also, make sure your tax filings and payments are up to date, since lenders may also look at your personal returns.
Do you have collateral?
Do you have personal or business assets that can be used as loan collateral? Lenders will be interested in a “secondary” source of repayment should you default. Are you willing to guarantee a loan personally? Expect lenders to require you to personally guarantee any business loan you
receive.
Do you have a business plan?
A business plan that includes detailed financial projections is essential to any loan request. Lenders will review these projections along with statements detailing how you intend to repay the loan. Most loan officers know business owners do not write their own business plans, but they should. Think about it, if you cannot place your ideas on paper for them to work yourself, exactly how will you be able to implement them over a 5 year period successfully.
It is fine to allow someone else to edit and fine tune the details but work with writing the plan yourself. Writing your own business plan shows the loan officer you took the time to write it, you’ll take the time to most likely follow it. A true entrepreneur is willing to endure all phases of their business, and it starts with developing the plan on paper not just in a dream state.
Have you put your own money into the business?
Just about every type of loan program requires that the business owners invest their own money and assets in the business. This demonstrates to lenders that the owner is committed enough to the business to put personal assets at risk.
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