How to: Apply for a Business Loan

How to: Apply for a Business Loan

In the scrutinized world of business loans cost to the applying business owner is heavily weighed on risk. The riskier the loan looks to a lender the less chance an applicant has at getting approved and the cost is higher. Aside from filling out an application I am going to touch on a couple key items that will help any business owner have a better chance at getting approved for business financing and a better chance at getting the best cost of money possible.

Bank Statements

Plain and simple the business applying for a loan has negative days in the bank statements there is little to no shot at getting approved for a business loan unless you have good collateral which we will touch on in a bit. If you plan on applying for a business loan or unsecured loan or merchant cash advance in the next three months you have to make sure you deposit all of your cash and keep your bank account positive.

If a lender sees that you can spend $50 a night at restaurants but can’t keep a positive balance it’s very hard to get approved. Trust me an underwriter will take notice. Also when you do submit your bank statements make sure you send in every page for every month requested. When business owners trickle a few pages in at a time or skip months it throws up red flags even if you simply forgot. As a side note if you are applying for a bank ACH unsecured loan and you do get approved you are probably going to receive a maximum approval of 100% of your average gross monthly sales.

Financials (Profit & Loss and Balance Sheet)

If you plan on applying for a business loan for an amount exceeding $50,000.00 or you are seeking a commercial loan the lenders are going to ask you to provide your most recent tax return and financials. Make sure your financials are in order. If you aren’t sure if your financials are in order it is worth having an accountant take care of that. You can’t send in an accounts receivable summary showing $150,000.00 outstanding with a balance sheet showing zero for A/R. Keep your financials simple. The more questions an underwriter has the riskier the loan looks to them. As a side note if your tax return shows a profit over two of the last three years you per-qualify for the best pricing options.

Rent (Landlords)

Pay your rent. I can’t stress that enough. If a vendor has to wait an extra week to get paid so you can cover the rent then so be it. Nothing turns a lender away faster than being behind on rent or a disgruntled landlord. Your landlord will be interviewed to see if you pay on time, if they have any plans of eviction, etc. Make sure you are paid up on the rent and that your landlord is happy. This lets the lender know that you have a much better chance at being in business through the duration of the payback of the loan and that is what they are most concerned with in the end anyway.

Merchant Interview

Keep a level head during any conference calls or interviews with lenders and their underwriters. Nine out of ten times you will have some kind of conference call or interview with the person underwriting your loan. Their job is to dig and pry a little. Sometimes they ask questions that will put you on the spot or put you in an awkward situation. Their job is to see if you contradict yourself or get nervous when asked certain questions. The cooler and more calm you are the less it seems you are hiding and that equals money saved for you.

These preparations will help you greatly during the underwriting process. I highly recommend speaking to an Advance Smart funding advisor to go over the preparations I mentioned above and more. It’s a free service so take advantage. Be a smart business owner and prepare for you apply for a business loan. It will make your plans come to life.