Are you planning to expand your business in 2016?
While you have many alternatives for financing that growth, from cash-flow to credit cards, business loans are a solid option.
The key to getting that important loan approval is proper documentation and sound financials.
To help you prepare for the business, loan process, we provide below six key tips for a successful business loan application.
- Get your financial house in order. Update all relevant financial documents. Each bank will have its own requirements for lending documentation. Typically, a bank will want to see:
- Income returns for the past 3 years (for you and your business)
- Financial statements for the business and for each owner. Many lenders will want to see the personal financial statement for anyone owning more than 20% of the company.
- Bank statements for the past 12 months for the business and its significant owners
- A listing of the current market value of potential collateral. If you have a strong business and a solid financial history, you may avoid needing to provide collateral. If your business is young and/or your finances are not rock-solid, you may need to offer collateral to back the loan. To prepare for this requirement, document the cost/value of personal or business property, which you could use as collateral.
- Credit reports for you and for your business.
- Your business plan, include cash-flow projections, profit and loss statements and balance sheets.
- Gather key documents. In addition to your financial records, lenders will want to see items such as:
- Articles of incorporation
- Business licenses and other registrations required for your line of business
- Commercial leases for your office space, equipment or vehicles
- Contracts with key vendors, partners and customers
- Prepare your story. Detail why you need the loan. Explain how your business will benefit and how you will generate sufficient cash to pay-off the loan.
- Shop local and do your homework. Local community banks are often the best resource for small business loans. Some banks may have a reputation as providing financing for your specific industry. Ask around in your industry and business network for recommendations.
- Talk to other businesses that have recently secured business loans at your target bank. If you understand the preferences of the lender you will approach, you can better prepare for your interview.
- Prepare for your interview. Make sure you are ready to put your best foot forward when you meet with the lending officer. Organize your presentation. Practice your pitch. Prepare a list of potential questions and develop answers and gather facts to support those answers.
- Seek expert help. If you have not applied for a business loan before, you will find many local resources available to help you. You can consult groups such as your local:
- Small Business Development Center
- Economic Development Office
- Women’s Business Centers
- SBA Office
If you are located in the Washington DC area, the staff at Richard A. Hall, PC would be happy to discuss your financial needs. We have worked with hundreds of local small businesses over the years and can help you prepare your financial statements and connect you with local lending resources.