While many business owners choose to grow their business organically with no help from borrowing, a business loan can provide a kick to push your business on. A common thing that puts people off from business loans is the long application process that they typically come with. So, what do you need to apply for a business loan?
Business loan requirements:
Many lenders, and in particular, banks, typically require a long list of documentation in order to approve a business loan. This can be time-consuming and especially difficult for start-ups, who are unlikely to have the required documentation.
Here’s a list of the factors that lenders will look for before approving a business loan:
- Cash flow figures
- Time in business
- Credit rating
- Debt currently owed
- Collateral for your business loan to be secured against.
You’re probably pretty overwhelmed right now, am I right? Well before you have a panic attack, not all lenders are the same, and you’ll be pleased to know that not all business loans require such extensive documentation. Typically, banks require the most information, whereas private lenders are more flexible. However, if you really are struggling to meet the requirements for a business loan then Low Doc Loans are a great option. As the name suggests, they’re loans which require less documentation than a standard loan.
Let’s dive deeper into the specific requirements:
Time in Business
Time in business relates to how long you have been operating. Depending upon the type of business loan you are after, you might be required to have been operating from anywhere from 6 months to 1 year or even longer.
Like all loans, your Credit rating will be taken into account to reassure the lender that you are likely to stick to your repayment plan. Business loans can be hard to come by if your credit rating is poor. Fortunately, there are solutions if you have a bad credit score. You can get a Bad Credit Business Loan, but this will mean higher interest rates than normal. Alternatively, you can get your Credit File Repaired. If you have defaults and court judgements on your credit file then these can be removed with the help of a specialist Credit Repair company.
Debt currently owed is another factor to take into account. If you already owe a lot of debt to creditors then this will be noted. In addition to this, if your company credit score is poor then it will be difficult to get a business loan.
What Collateral Do You Have?
While unsecured loans aren’t unheard of, when it comes to business loans, collateral is most commonly required. This is something for the lending company to secure your loan against in order to reduce their risk if you stop making payments. Any asset of significant value can be used as security. Most commonly, however, collateral comes in the form of property (domestic or commercial).
Cash flow figures might be required in order to prove that you are bringing in enough cash to cover the loan that you have requested.
What can you use a business loan for?
A business loan is dependant on your goals and desired outcomes. Getting one could be the difference between your business breaking even and making millions. Here are some things you might need a business loan for:
- Research & Development
- New product lines
- New office space
- New locations
- Equipment & Materials
What documents do you need to apply for a business loan?
You will generally be asked to provide the following documents when applying for a business loan:
- Financial statements
- Proof of personal income and identification
- Personal and business bank statements
You may also need to provide further information if you have a start-up or newer business, such as your cash flow projections, detailed business plan and lease agreement.
What kinds of loans are available to businesses?
- Low Doc Business Loans
- Small Business Loans
- Business Debt Consolidation Loans
- Line of credit
- Bridging Loans
- Short Term Business Loans.
It is beneficial to understand what you need to apply for a business loan so that you are prepared. Being prepared can help to ensure that the process of being granted a loan goes smoothly.
ALC Commercial offers a wide range of services and flexible packages to suit you. Minimal documentation is required and we promise to offer a very personal service, which banks will not.