I have operated my business for several years. Occasionally, I apply for a business loan to boost my business. A business loan is one of the best ways you can grow your business and expand your operations. However, applying for a business loan can be complicated, especially if you don’t have all the necessary documents. You have to submit several documents to have a business loan approved. This is the same regardless of the type of loan you are applying for. Even if you have a relatively successful business and just need a loan to potentially purchase extras such as smart building applications and computing software upgrades, then you will still need the specific documents in order to be approved.
The documents will vary depending on the lender. It could also vary depending on the type of loan you are looking for. For instance, if you are looking for bdo business loan, then you would need a valid identification card, a marriage contract (if applicable), proof of minimum annual gross sales, audited financial statements, and the latest general information sheet. However, if you borrow a DTI or any other type of loan, you may not need the same documentation. If you are opting for a working capital loan, for example, companies like L3 Funding (https://l3funding.com/working-capital) can help you out even when other lenders may have rejected your loan. Provided your business documents are all in order. I have outlined the common documents that you need to compile when applying for a business loan. These documents will help the lender understand your business and determine your ability to repay the loan. You can get these documents compiled and published through a printing service provider similar to Printivity to present them to lenders. Especially for the business plan, you can choose a professional profile for the booklet and get it bound to make it presentable. Moreover, I have come to learn that the more information I disclose while applying for a loan, the higher the chances of having my loan approved.
Before approving your loan, the lender will want to know how your business repays loans. A credit report will indicate whether your business repays loans on-time and in full. A poor credit score won’t make it entirely impossible for your business loan to be approved but will affect the amount you qualify for. I always advise business people to create separate legal entities for their businesses. This way, your credit score won’t affect your business’s credit score. I have a separate legal entity for my business; my old student loans do not affect my business’s ability to borrow.
Lenders can use your tax returns to gauge how your business has performed in the past. What should you do if the lender requests for your tax returns and your business is new? I was once in this dilemma; I requested my accountant to create a projection of how my returns would look the following year.
When filing my tax returns, I try to balance maximizing the deductions and maintaining an image of adequate revenue. Writing off some of your taxes will help you minimize your expenses. However, you should also realize that you may have issues with lenders if you have too many tax deductions.
Every time I apply for a business loan, lenders always request my bank statements. Your business’s bank statement will help the lender determine your business cash flows. Statements will also help to prove the legitimacy of your business. You are more likely to get a business loan if lenders feel convinced that you generate adequate cash flow and manage your expenses effectively.
While appraising you for a loan, the lender will seek to know how you plan to utilize the loan and your plans for future cash flows. You should create projections of both your budget and your future workflows. I always demonstrate how my business will perform better with the financing in my projections, and this always earns favor from lenders. Good projections will assure the lenders that you are a viable borrower. They will see that you can utilize the loan properly and pay in full and on time.
In several instances, I have had to provide an income statement while applying for a business loan. An income statement illustrates the revenues and expenses. A lender may request an income statement to help them determine how your business has performed in the past few years.
I have just outlined a portion of the paperwork that a lender may request as you apply for a business loan. However, the requirements will vary depending on the financing option you seek. The documents needed for a merchant cash advance may vary from those needed for an SBA loan. Having all the documents needed by the lender works in your best interest.