A bank loan can offer you financial relief during difficult times. You can use the money to purchase inventory, cover payroll, improve your cash flow or meet other business expenses. Unfortunately, bank loans also come with many requirements that most borrowers don’t qualify for. Here are a few conditions you must meet when getting bank loans for small businesses.
Most banks will require you to submit a business plan. This may seem tedious, but it helps the banks determine the ideal loan amount and term for your business. Write a detailed business plan that highlights the business’s goals, finances, and other important information.
Purpose of the Loan
Although not all banks have usage restrictions, most will ask how you plan to spend the money. Some may even refuse to give you cash if you intend to use it to reduce debt. If you don’t want to worry about the bank scrutinizing how you’ll use the loan, explore other forms of financing.
When taking out a loan, the bank will need to conduct a credit check to determine your business and personal credit score. Personal credit history is particularly important in business structures such as partnerships and sole proprietorships. Know your credit scores before applying for bank loans. If they aren’t ideal, improve them first before approaching a bank.
Another requirement when getting bank loans for small businesses is a borrower’s financial information. These are both personal and business financial statements. Some of the common documents the bank will require include accounts receivables, balance sheets, cash flow statements, and profit and loss statements. The bank needs to analyze these documents to determine if you’re a good candidate for a loan.
Most banks will require some sort of collateral before giving out a loan. This can be equipment, inventory, automobile, or any other item of high value. The collateral has to match the amount of loan you want.
Getting bank loans for small businesses can be challenging, but fortunately, they aren’t your only option. Get in touch with Scarlan Capital Group to learn more about how you can access a loan for your small business.