With rates still favorable, there may be no better time to apply for that loan than now. What is a good reason? Hiring additional employees, carrying more inventory, larger space or equipment upgrades all in support of business expansion are good reasons. Even if you just need a credit line, most bankers will tell you to do these things when business is good and not put yourself in an emergency situation where you need the money now.
Your lending institution will go through a process in which they will ask for your financial information. This is normal and necessary for them to evaluate your creditworthiness. You can eliminate much of the inconvenience by understanding what is expected. Ideally presenting everything at once will make the process much faster and easier for everyone involved.
Here are some things your lending institution may ask for:
- Get your books in order: Every lending institution wants to see good financial statements and proof of accurate record keeping. Get professional help if you need to.
- Tax Returns: Expect to produce your business and personal tax returns for the last two to three years. Financial statement supplements may be beneficial.
- Personal Financial Statement: Of personal assets owned, personal debt and your resulting net worth is required to help ascertain your ability to assist the business in paying if such support is ever needed.
- Background/ Personal History: A summary statement of the market in which the business operates, its competitive advantage, and your personal experience, training and skills.
- Personal Credit Report: Just about all lenders will require a personal guarantee. That means your personal credit will be considered in the loan decision. If you don’t know what your credit score is, you can find it for free at www.freecreditreport.com. If there are any inaccuracies or blemishes, you will want to get that taken care of first.
- Legal Documents: Copies of governance documents such as your corporate by-laws or operating agreement. Please confirm your business filing with the Secretary of State is active and current.
Knowing what lenders want ahead of time will help you stay in control of the process and give lenders the peace of mind knowing that they are dealing with a well organized firm.
An institution like Community First Credit Union makes loan decisions locally so your company and personal reputation is important to them.
Your best chance for loan approval starts with doing business with a banker that understands how you do business and how you make your money. Be open and honest with your intentions and shortcomings. This can go a long way in the application process.
Isaac Jones is a twenty plus year veteran in banking. In his role as a business banker with Community First Credit Union, he demonstrates expert level knowledge of conventional business loans and the SBA 504 loan program. His specialties include commercial real estate loans, term loans for equipment and vehicles, and lines of credit. His mission is to provide solutions to everyday business needs through a comprehensive platform that consists of deposit accounts, payroll and merchant services, and electronic transactions. He is a graduate of Morehouse College and enjoys reading, travel and history.