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How To Get A Business Bank Loan Easily?


Banks  DON'T fund ideas or startups they fund cash-flows against assets. 

That bank loan you want for your business? Well, the bank is going to want a lot before they give it to you.

here’s what to expect a bank to ask for when you apply for a commercial loan for your business. There will be occasional exceptions to every rule, of course, but here’s the general rule:

1. Collateral

As I explained above, banks do lend money to startups or rarely do. 

So your business has to have hard assets it can pledge to back up a business loan. Banks look very carefully at these assets to make sure they reduce the risk. For example, when you pledge Accounts Receivable to support a commercial loan, the bank will check the major receivables accounts to make sure those companies are solvent; and they will accept only a portion, often 50 or sometimes 75%, of receivables to back a loan. When you get an inventory loan, the bank will accept only a percentage of the inventory and they will kick a lot of tires first, to make sure it isn’t old and obsolete inventory.

The need for collateral also means that most small business owners have to pledge personal assets, usually house equity, to get a business loan.

2. Business plan

There are exceptions, but the vast majority of commercial loan applications require a business plan document. Nowadays it can be short—perhaps even a lean business plan—but banks still want that standard summary of company, product, market, team, and financials.

3. All of your business’s financial details

That includes all current and past loans and debts incurred, all bank accounts, investment accounts, credit card accounts, and of course, supporting information including tax ID numbers, addresses, and complete contact information.

4. Complete details on Accounts Receivable

That includes aging, account-by-account information (for checking their credit), and sales and payment history.


5. Complete details on Accounts Payable

That includes most of the same information as for Accounts Receivable and, in addition, they’ll want credit references, companies that sell to your business on account that can vouch for your payment behavior. If you need to know more about Accounts Payable, 


6. Complete financial statements, preferably audited or reviewed

The balance sheet has to list all your business assets, liabilities and capital, and the latest balance sheet is the most important. Your Profit and Loss statements should normally go back at least three years, but exceptions can be made, occasionally, if you don’t have enough history, but you do have good credit and assets to pledge as collateral. You’ll also have to supply as much profit and loss history as you have, up to three years back.

7. All of your personal financial details

This includes social security numbers, net worth, details on assets and liabilities such as your home, vehicles, investment accounts, credit card accounts, auto loans, mortgages, the whole thing.

For businesses with multiple owners, or partnerships, the bank will want financial statements from all of the owners who have significant shares.


8. Copies of past returns

I think this is to prevent multiple sets of books—which I think would be fraud, by the way—but banks want to see the corporate tax returns.


end 


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