My First Time Applying For A Business Loan
A majority of today's entrepreneurs that have started their businesses within the last three years have never applied for business credit before and are unfamiliar with the process and requirements to get approved for funding. With the business lending space becoming a saturated ground of brokers that aggressively attempt to offer short-term, high-interest loans, their focus is on booking a deal rather than educating their clients. This should be a red flag for anyone looking to establish a relationship rather than just take money from an ATM.
So, what is needed to get approved for business credit? This depends on a couple basic things. First, is the amount of credit the company wants to qualify for followed by how long the business has been around. The second determining factor of what will be required is how long that business has been in existence.
When a business is seeking a smaller amount between $10,000 and $200,000 there isn't much needed to see if they will qualify for funding. Most lenders will require a credit application, three-to-six months of bank statements and sometimes a previous years' tax return for the business. Pending the business is approved and accepts the terms, there will be additional information requested by that lender. Generally, this will include proof of identification and a voided check for the account that was underwritten to verify routing and account numbers.
On the other hand, if the business is seeking an amount north of $200,000 there will be a bit more required. In addition to what was mentioned above, a business will need to supply multiple years of business tax returns and financials, AR and AP reports, and a detailed debt schedule to name a few. Again, some lenders require more than others. To prevent wasting time, it is best for any entrepreneur to ask these questions before applying to limit the number of surprises that could surface. In some cases, not every business has all the necessary documents prepared and this could produce barren results if not aware of what's needed ahead of time.
When choosing a financing company to work with there should be some upfront research done on that organization before sending any information to them. A clear indicator of what to expect could be found in their reviews, ratings and the amount of time such company has been around. A business with only a few reviews or a short time of existence may not be the best route if the other company you're considering has the opposite attributes.
Contact me anytime if you or your clients are looking for business credit for the first time and would like a personalized experience to fully understand what is required and what to expect throughout the process.