Applying for small business loans is easier when you know what to do and what to include in your application letter. A lot of small business owners do not know the importance of including these things. They apply haphazardly for loans without taking their time to find out what must be included.
You need to think like the lender when filling out your business loan application. Put yourself in the shoes of the company and ask yourself what you’ll like to see from any business that wants to borrow money from you. Do this, and your chances of your loan being approved will skyrocket.
In this article, we’ll show you the most important things to include in your business loan application, so you can have successful loan applications. These documents help to prove to creditors that you are worthy of receiving the loan.
Include these documents when applying for fast, convenient, and accessible small business loans from Camino Financial.
Your credit history is arguably the most important information that lenders require for small business loans. Your credit history will be reviewed to test your creditworthiness and your faithfulness in repaying creditors. This will help them determine if your loan will be approved or not.
If your business is new, your personal credit history will be reviewed instead of your business’s personal credit history. Obtain a credit report on both yourself and your business before applying for credit. Doing this ahead of time will allow you to scrutinize the report and detect inaccuracies and errors. If you do, you can obtain the report from the same credit reporting company used by your lender.
Collateral is an asset or property that secures small business loans. The collateral will likely be seized if you are unable to repay the loan. The presence of collateral indicates to a lender that you are serious about the loan and you are ready to forfeit the collateral if you continue to default.
The collateral is usually a long-term property with no prior or superior liens so as to ward off other priority claimants. The lender will inspect the collateral documents to ensure that they are secured and okay.
Your business cash flow history is a good addition to your business loan application form. The cash flow cycle shows all cash inflow and outflow to the business. It gives a good idea of your sales, demand cycles, and whether your business will generate enough cash to repay a loan.
It also helps to highlight your competence in managing the business and cash that flows through the business.
Cash flow projection is a futuristic prediction of what your business cash flow will be. It is a realistic calculation that forecasts business transactions using the current outlay and estimated growth projections. Be careful to be as accurate as possible.
If your business is new, a business plan is one of the most valid documents that you can present to a lender. You don’t have any financial statement or creditworthiness for the business. Your business plan is the only thing that can help to argue your case and help you to obtain small business loans.
The most important financial statements are the Statement of Financial Position or Balance Sheet and the Statement of Income. Other financial statements include Statement of Equity and others. These documents help lenders to review the financial status of your business.
Lenders may want to see your insurance information to know if your small business is well secured against some unforeseen circumstances. The insurance statements will also let them know the beneficiaries of such policies, the amount of insurance premium paid, and how it may affect your loan repayment.
These are the important documents that your small business loan applications should have. They increase the chances of your loan being approved. Never forget to include them in your loan application.