Commercial loan requirements are different from those of residential or auto loans. Commercial loans are looked at differently. They are also paid back in a variety of ways. Several things go into how your loan is approved. Before you apply for a commercial loan, take a close look at the requirements you will need to meet. The list isn’t long by any means, but each requirement is included to represent a bigger picture of what you are trying to accomplish. Look closely at the following five requirements and begin to put your information together.
A Clearly Defined Purpose
Depending on the lender you choose, they may require that you submit a letter of intent or purpose. This will lay out your plans in great detail as to how the money will be used if your loan application is approved. Expanding the business, paying bills, upgrading inventory, or making general improvements are all possible reasons to apply for a commercial loan.
Well-Thought Out Business Plan
Having a well-thought business plan is also a must. Not only does it show how your business is functioning now, it lays out your plan for the future. You can show your expected growth and potential profit margins for the next five to ten years. In your business plan, you can detail any upgrades you plan to make, as well as the possibility of hiring more people over a specific period of time.
Proven Track Record
One thing that most lenders will look closely at is your business’s track record when it comes to its credit history. The lender may request copies of your financial records as well as your bank statements. Being able to show that your business has a good credit history is a big step toward being approved for your loan. You may be asked to provide up to six months of past financial records.
In addition to the information about your business, a lender may also require information about you as well. They may want to know about your personal background, like your criminal history and what educational degrees you may hole. They may also look at your financial history and overall credit rating to find out if you will be effective at making the best use of the funds.
Company’s Financial Status
Your company’s financial health will also be looked at very closely. Does your business run efficiently? Are you doing everything you can to save money? Are you always looking for new ways to improve the operations of your business? When you can prove that you have improved the fiscal health of your company due to specific changes or upgrades, it shows you have the company’s best interest at heart. Meeting commercial loan requirements means you will need to complete several steps. You will need to provide a detailed plan, along with a wealth of information that will prove you are doing everything you can to operate our business efficiently. Your lender may help you organize the information so that it shows a true financial representation of your company.