The scenario: you suddenly thought of a new venture, deliberated and decided, so now you’re wondering where to get a business loan, fast. You should be aware though, that getting a loan, much more a business loan, is not as easy as it sounds. Let alone starting the business and investing in something you are not totally sure of.
What is a business loan?
A business loan, by definition, is a bank loan granted for the use of a business. A bank loan on the other hand, is a loan made by a bank to be repaid with interest, on or before a certain fixed date. Sole proprietors, corporations, partnerships and nonprofits may be given business loans.
There could be various reasons why one would opt to get a business loan. Commonly, it is needed to start a new business. Sometimes business owners make business loans during times of financial difficulty, if they are purchasing supplies and/or equipment, renovating, or to just cover emergency expenses.
Things to know
One of the first things to consider on how to get a business loan is the type of business loan you wish. Like other kinds of loan, business loans can either be secured or unsecured. Secured loans can be guaranteed with some type of business-related collateral or with personal assets of the owner. Business loans can have a fixed maturity date (closed-ended) or they can be available for re-borrowing (open-ended). These would all depend on the lending bank, company or corporation.
How to apply for a business loan
Like other loans, applying for a business loan will have certain requirements. Briefly, here are what most banks or financial institutions may ask from you: personal background (such as previous addresses or names used, criminal records, educational background, etc.), resumes, business plan (very crucial since lenders want details on the revenue model), personal and business credit reports, income tax returns, financial statements, bank statements and collateral/s.
One or more of the following legal documents may also be required by the lender: business licenses or registrations, articles of incorporation, contracts with third parties if applicable, franchise agreements and commercial leases.
Just preparing the paperwork can be stressful, but that’s just the start. Upon presenting the requirements, your lender will ask a series of questions relating to the business loan. Think of it as a short, semi-casual interview that can either make or break your loan approval. Lenders would want to know why you are applying for a business loan and how you plan to make use of the loan income. You may be asked about assets you are to purchase and their suppliers’ contacts as well. You may also be asked to further elaborate your other businesses (if applicable).
If you’re still thinking of a way on how to get a business loan the fast and easy way, well you might be headed towards disappointment. Relatively, lenders would be more meticulous in approving business loans so unless you have promising business plans you might expect rejection especially if it is your first time to make a business loan. Click here for more info. on business loans.