quick-guide-to-common-business-loan-requirementsYou may be wondering why you should take on debt in the form of a business loan when it’s already difficult to manage your current finances. Getting the financing you need in business allows you to grow your business now, instead of waiting for the cash flow to come in later.
A business loan can also be a form of good debt, wherein you’ll be able to purchase essential tools or materials that can give your business a boost in profits. When you plan out a good strategy to make the most out of a loan, the return on investment may pay off for the loan itself several times over.
Once you’ve compared the loan options available, it’s time to check whether you are eligible to apply for financing. Make a checklist of requirements that your shortlist of lenders are asking for. If you’re still wondering whether you can be eligible for a business loan, here are the usual requirements which you might need to prepare:
- Identification: may include driver’s license or passport.
- Business registration number: This is the number you received when you registered your business.
- Documentation for Loan Amount and Use of Funds: This is a proper documentation of how much you want to loan and how you are going to use it.
- Financial Statements: These may include Balance Sheet, Income Statement, Cash Flow Statement, Statement of Retained Earnings.
- Bank Statements: Submit to the lender your latest business bank account statements in electronic form or hard copy.
- Business Plan: Banks will usually require this. It includes your business purpose, financial management, and other factors.
- Financial Management Plan: This showcases how you’ll manage your business finances, including cash flow and repayments.
- Proof of Personal Income: Secure a documentation on how much you earn every month, which can come from your business or other income streams.
- Credit Report: Get a copy of your credit report from credit reporting bodies such as Equifax. There are certain agencies that allow you to get a free credit report, so do check your country’s credit agencies to see if you can avail of one.
- Collateral for a Secured Loan: If you’re getting a secured loan, you’ll have to present ownership of a property or business asset that you can submit as collateral.
To increase your chances of getting loan approval, fine-tune these aspects in your personal and business history:
- Background Check: The first step that lenders do before going through the process of approval is to get a summary of your business. This includes background, history, company names, registration date, industry, and a few facts on what the business does. For your company name, include the full official name of business as what has been registered.
As you submit identification card copies, they will also do a background check on you to see if you are a good fit as a borrower. It also helps when you present yourself well to the lender during the interview and submission of requirements.
- Credit Score: Lenders will analyse your credit history for them to know how you handle past finances. A credit score or credit rating sums up your credit report into one number. It will show lenders how trustworthy you are as a borrower.
Before applying for a loan, make sure that you have built a good credit score. Your payment history is a big factor that makes up this number, so make sure to always pay on time and in full. Check your credit report for errors in case that it may affect your loan approval.
- Annual Turnover: It will also help you in the loan application process if you show the approximate turnover of your business. An easy way to calculate annual turnover is to divide net sales or revenue by the average total assets of your company. When lenders see that you have the cash flow to cover the loan repayments, they are more likely to approve your loan request.
The best path forward on this would be to ensure that you already have a good cash flow every month, and that you can accomplish the repayments with the consistent flow of income from your business.
- Existing Financial Obligations: Declare other types of loans or credit being used in your business. The lender will check if you have an overdraft, other business loans, or business credit cards. They may want to see how you’ll handle getting an additional loan, or that your finances and cash flow are good enough to repay the loan during a given period.
It’s best to keep your lines of credit at a minimum and lessen outstanding debt before applying for a loan. You have to show the lender that you have all finances in order and you can carry the responsibility of getting additional financing.
In a Nutshell
You’ll be able to get a business loan easily when you have built up a good credit history and established a consistent flow of income for your business. If you find it hard to follow through with the strict requirements of banks in getting a loan, there are fintech companies such as Bizzloans which only require a valid business registration, photo ID, and business bank account statements. You’ll get funding to your account in as quick as 24 hours when you get a free quote below.
No Security Necessary
The main thing that makes unsecured loans more attractive than secured loans is the fact that they’re no security. It might be an obvious thing to highlight but it clearly matters. You won’t be weighed down by the pressure and worry associated with having collateral hanging over you and potentially being lost to the lender if you fail to make repayments. If you don’t want to take the risk of losing your collateral, you just need to opt for an unsecured loan instead. It’ll allow you to avoid any risks associated with secured loans.
Build Up Your Future Credit Score
By taking out a loan and then paying it off on time, you will help to build or repair your credit score. Many companies are dealing with poor credit, but by taking out an unsecured loan with a lender that is happy to lend to companies with poor credit, you can start to turn the situation around. Meeting regular repayment deadlines shows the world that you are able to stay on top of your financial obligations and pay off the money you owe, and that will only help your business going forward.
Why Your Business Might Want to Take Out an Unsecured Loan
There are lots of reasons why your business might take out a loan, as well as reasons not to. You shouldn’t take out a loan to cover running costs, but if you want to do other things, such as the things we’re going to discuss below, an unsecured business loan can be ideal.
Grow and Expand
Most entrepreneurs have big plans for their businesses. They want to ensure that their business is one that’s got a bright future. So if the time has come for you to grow and expand your business, you should think about whether taking out an unsecured business loan might help you to do that. It could be exactly what you need to get your business moving in the right kind of direction. It takes money and investment to grow your business and a loan might just be the ideal solution.
Take on More Clients and Customers
If your business doesn’t currently have the resources to deal with more customers and clients, it could be time to scale things up. However, that’s something that costs money, whether you like or not. Taking out an unsecured business loan could help improve the resources your business has available. It could mean hiring more people so that you have the human resources needed to take on more clients and make more customers happy. The loan will cover the costs associated with doing that and it’ll pay for itself if you’re able to improve your profits as a result.
Fund a New Marketing Campaign
Maybe it’s the case that attracting new customers to your business is where your problems lie. It’s not always easy to get your voice heard and make people aware of why they should be taking notice of your business. An unsecured loan could be used to fund a new marketing campaign that gets your message out there and makes more people interested in your business and what it’s offering. So if you have an idea for a marketing campaign that you think might work but you don’t have the financing for it, consider a loan.
Improve with Fewer Risks
The chance to improve your business in the many ways mentioned above offers you a real opportunity that you might want to grasp. Secured loans can offer the same access to financing but come with more risks to your business. With an unsecured loan, you can reap all the rewards that come with having the cash to invest in your business without having to worry about the risks adversely affecting the business in the future. The chance to improve with fewer risks attached to that chance should not be ignored or dismissed.
The Requirements for Getting an Unsecured Business Loan
There are some requirements you’ll need to be aware of before you take out an unsecured business loan. These aren’t too harsh or restrictive at all, but they are important.
24 Month Limit
When you take out an unsecured loan from Bizzloans, you have to pay the loan back within 24 months. That’s the maximum repayment term that’s on offer. Of course, that won’t be a problem for the vast majority of businesses out there. It’s important that you look at the finances closely and decide for sure that this is something your business is going to be able to do. You’ll have a chance to do this when you get a quote from us, so you’ll know exactly what you’re signing up to.
Business Bank Statements
To ensure your business is in a financial position to take on a loan of the size you’ve applied for, you’ll need to simply submit your business’s bank statements. This allows us to ensure that we lend responsibly and don’t burden you with a debt that is too much for you to take on. It’s in both your best interests and ours that you’re able to handle the loan that you take on.
To ensure everything is correct and proper, and you are who you say you are, you have to submit a photo ID. This is common practice and ensures that all financial transactions are above board and in order. It’s very easy to do and needn’t be a headache for you. Once we are satisfied with your application, you’ve provided the bank statements and we’ve checked your ID, it won’t be long before you have access to the loan you applied for.
Getting an unsecured business loan for your company could be just what it needs right now. It’s a much safer option than taking out a secured loan and you’ll be accepted much faster. Don’t hesitate to get in touch with us here at Bizzloans if you’re thinking of taking out an unsecured business loan.