To run a business effectively it is very important to have an idea, but an idea remains the same until a plan is made and funds are not collected to turn this idea into a business. When you go to apply for a personal loan, then also the lenders ensure to ask you some questions related to your personal well being and that of the business. This is done to avoid any default loans and save the money of the depositors.
In this article let us discuss the ten things that lenders ask when one requires for availing an online business loan.
Things a Lender Will Ask You When You Need a Business Loan:
Lenders do provide money to borrowers, while some are given in their capacity some others are given in collaboration with the government. However, unlike a personal loan, for a business loan, one is required to pledge any asset to get funds for their business. This helps in reducing the risks attached to giving a loan.
- Business plan
While the collateral will ensure safety, to be sure that you have a business idea and a vision, banks require the business plan. The plan does not have to be elaborate, instead, it can be a short, lean business plan. All they mainly require is the standard summary of the company, product, market, team, and financials.
- All of your business’s financial details
The financial details include the current and past loans, any debts, bank statements, investments, credit cards and necessary supporting documents for the same. The documents might include tax ID numbers, addresses, and complete contact information.
- Complete details on Accounts Receivable
Banks have to make sure that is not using the money of its customers and causing a loss to their funds. So, one also has to submit, ageing, account-by-account information (for checking their credit), and sales and payment history.
- Details on Accounts Payable
Similar to the receivables, the payables includes the credit references, companies that sell to your business on account that can vouch for your payment behaviour.
- Complete financial statements
The balance sheet of a company includes its assets, liabilities and capital along with the balance sheet. Even the profit and loss statement for the past 3 years is required. If all your financials and audited properly then that has a positive impact on your loan approval application.
- All of your financial details
Apart from the details of the company, the financial details of the owner are also necessary. If the company has multiple owners, then the financial details of all have been owners is required. This includes the net worth, details on assets and liabilities such as your home, vehicles, investment accounts, credit card accounts, auto loans, mortgages, the whole thing.
- Insurance information
Since lenders also ensure least risks, they often ask the owners to take insurance, if they are a new business. This will help cover the loan payout eve if one of the patients dies. The fine print can direct the payout on death to go to the bank first, to pay off the loan.
- Copies of past returns
If the company has been running for some time, then the lenders also see the corporate tax returns
- Agreement on future ratios
Most of the commercial loans include loan covenants. In this, the company pledges to keep a certain ratoon- quick ratio, current ratio, debt to equity, for example, in a particular limit. If the ratios fall below the limit, then technically the company is in default of the loan.
Apply for the loan
Once all these questions are answered and taken care of you can apply for the business loan by following the below steps.
Step 1: Visit the lender’s website, Business loan webpage and click on Business loan or SME loan.
Step 2: Fill in all the necessary information and upload the relevant required business loan documents.
Enter the loan amount you need and the tenure by which you will be able to repay it.
Step 3: Based on the details entered, if your application is approved, you will receive a call from the customer executive for further details.
Step 4: If you agree to the details, you will receive a reference number through which you can track your loan status, and clear any confusion you might have later.
Step 5: Ater your application has been verified and you will be given a customised loan amount and rate of interest.
Step 6: After the approval, the loan will be disbursed into your account.
Business Loan is a great tool to ensure that your business is taken care of from buying equipment, paying salary, renting an office and many more. This will be your first step towards a great start to your career, so ensure that it is taken care after carefully scrutinising the various lenders and their terms available.