- If I am applying for an SBA loan, what type of information will the bank ask for?
When applying for an SBA loan, small business owners are required to fill out forms and documents for the specific loan they are trying to get. In addition, the SBA encourages borrowers to gather some basic information that all lenders will ask for, regardless of the loan type. The following items are required:
- Personal background and financial statements
- Business financial statements
- Profit and loss statement
- Projected financial statements
- Ownership and affiliations
- Business certificate or license
- Loan application history
- Income tax returns
- Business overview and history
- Business lease
- What questions will I have to answer when applying for an SBA loan?
The SBA recommends being prepared to answer several questions, including the following:
- Why are you applying for this loan?
- How will the loan proceeds be used?
- What assets need to be purchased, and who are your suppliers?
- What other business debt do you have, and who are your creditors?
- Who are the members of your management team?
- Where can I find an SBA loan application?
Loan applications are available on the SBA website.
- What will I need if I’m applying for a conventional loan from a bank?
When applying for a bank loan, you’re required to share all of your financial details. You’ll need to provide your lender with the complete financial background of your company, your future growth plans and often your personal financial information. The more information you have to illustrate that you’ve run your business well, the more confidence banks will have in investing in you.
You also need to show exactly how you will use the requested money. For example, if you want to purchase new equipment, provide quotes on the exact costs, how much capital you need to facilitate this purchase, and specifically how the new equipment will grow your business.
- What do I need to consider when applying for a loan through an alternative lender?
When considering an alternative lender, consider the following:
- Interest rates: Small business owners should know that they can pay off the loan relatively quickly to avoid hefty interest charges.
- Fees and policies: Speak with each lender about fees that may apply when the loan is funded and how the repayment will affect your cash flow.
- The lender’s ratings and review: There are many companies today that say they are alternative lenders, but look for lenders that have an A+ rating with the Better Business Bureau.
- What type of information do I need to provide to alternative lenders when applying for a loan?
Even though it can be easier to obtain a loan from alternative lenders, you still need to provide them with an array of personal, business and financial information. Not all lenders ask for the same information. Some pieces of information they could request include a plan for how the money will be used, your credit history and a verification of your income and assets.
- What do lenders consider when reviewing a loan application?
There are a variety of factors that both banks and alternative lenders consider:
- How long you’ve been in business: The longer track record you have, the more comfortable lenders will feel in loaning your business money.
- Credit score: While some lenders place more stock in credit scores than others, nearly all take the scores into consideration. A bad credit score won’t necessarily rule you out, but it will affect your loan terms. The worse your credit score, the higher your interest rate will be.
- Monthly revenue: Lenders want to ensure that you have enough money coming into your business to pay off the loan.
- Other factors lenders may consider are previous tax returns, whether you have a history of paying creditors on time, whether you have had any bankruptcies or bounced checks, whether you have sufficient collateral and what you plan to use the money for.
- Does it cost money to apply for a loan?
It depends on the lender. It is important to ask what types of fees are associated with the application. Some lenders charge an application fee, while others charge fees for items tied into the application, such as the cost to run your credit report or appraise your collateral.