5 Step Guide To Getting a Business Loan

Loans are essential to expand the existing business or to adopt latest strategies to take your organisation to the next level. Every business needs a loan at some point or the other in the course of growth. It is very important to know the process of getting a business loan from your banker. Banks have certain eligibility criteria for any lender to apply for business loans. Loan depends on three sections credit, capacity and collateral. Here is a guide that can help you get loans.

  • Decide how much loan you need: It will depend on whether you are running an existing business or a start-up. Particularly entrepreneurs face capital problem when they want to start a business, if they don’t decide how much loan they need, then they most probably cannot start their business. Calculate the financial needs to decide the money you are lacking. Especially start-ups overestimate their costs, it will make banker’s job more difficult. You should analyse your financial needs to come to a conclusion.
  • Credit score: Credit history can impact your loan amount. Whether it is a business loan or a personal, banker will defiantly check your previous pending amount of credit history.  If you maintain a good credit history, you can surely expect a loan from your banker. If you want to improve your credit history, repay your payday loans or other short-term loans on time. You can even set up payment reminders to pay bills on time and minimise the amount you owe to your existing lander.
  • Equity: Lender will check your equity details before granting loans, lender will not take a risk if you have invested personal money in your business. In order to get i
    nstant loans, you should have equity worth at least 20% more than the refinance. Usually equity depends on the market value, so lender is likely to take the risk. So you should maintain minimum 20% equity to get loans.
  • Find a lender: It is a difficult task to find a right lender; each banker has his own eligibility criteria for granting loans. You can opt loans form commercial banks and non-bank lenders to fulfil your business needs. Usually non-bank lender may take longer time for application processing; they may charge high interest rates. But they can offer loans for business which commercial banker finds too risky. Commercial bankers are one of the largest lenders to all types of commercial needs. Banks offer loans based on collateral, equity, good credit history and personal financial statements. But non-bank lender will not look at your credit history before granting loans.
  • Prepare loan application package: Loan package is a paperwork that you will submit to the lender to grant loans. Paperwork includes personal tax statements, personal financial information, business financial projections, business loan, owner resume and information on business location, contract and sales. Make sure that you are ploanroviding genuine information to get loans without any problem.

These are the necessary steps to be followed to get a loan for your business.

About the Author:
The guest post was contributed by Sophie, financial guest blogger from Manchester, UK. Find out more about her finance related blogs @financeport .

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