When applying for a business loan it’s imperative that you show the loan officer that you’re an organised individual. This makes a good first impression and also works on a personal level – it shows them that you’re not there to waste their time.
1. A short description of your business
This should include who owns the business, who you are, who your customers are, who the competition is and what products and services you offer. Too many applicants have provided too much or too little information when applying for loans which counts against them.
2. Current lenders
The lender you’re applying to is going to find out if you’re currently repaying another lender so tell them right from the start. If you think they won’t check you’re mistaken, though you’d be right in thinking that it will harm your application if you leave this out.
3. Financial statements
If you’ve been operating for more than three years keep your financial statements limited to this three year period – three years is ample. If you haven’t been in operation for that long then provide financial statements for as long as you’ve been operating for. Keep your financial statements simple and have them reviewed by an independent accountant.
4. Personal financial statements
If you’re the owner of the small business then include your own financial statements. The lender will be checking up on you too and failing to disclose your own financial statements makes it appear as though you’ve something to hide. It’s better that everything is out in the open to begin with.
5. Financial projections and budget
You’re going to need to show what you’re planning to do with the loan if you’re successful so don’t overlook your financial projections and your budget. This is even more important than your financial statements in many regards. If you’re going to include forecasts for sales and profits make sure they’re substantiated.
6. Tax returns
By including tax returns from previous financial years you’re substantiating the information you’ve provided in your financial statements and your financial projections and budget.
7. Off-balance sheet assets and liabilities
Chances are they’re going to find out if you’ve any off-balance sheet assets and liabilities so come right out and tell them. By doing so you stand a better chance of them taking your application more seriously and that’s what you want to achieve here.
8. Fixed assets
You’ll also make a great impression upon the loan officer if you keep this short and sweet – they don’t want to trawl through pages of information just to get to the point. The original cost, acquisition date and the accumulated depreciation should be included here, as well as its net value – book value, market value and orderly liquidation value.
9. Accounts receivable and payable
Once again, keep things short and sweet here – the loan officer wants a summary of your accounts receivable and payable and nothing more. Some business experts also advocate adding supplemental detail about top customers and most prominent suppliers.
Are you prepared for the meeting? Although you may have prepared all the items you require, how ready are you to answer any queries the loan officer may have? You can’t continually refer to the reports you’ve compiled because this isn’t as simple as applying for personal loans – you need to know what’s on those reports and come across like you know every item listed and can provide relevant information concerning it.