A Business loan is one the most essential things when it comes to a business. A business loan can be used for starting a business or for expansion purposes. Hence, it is imperative that you know how to apply for a business loan. One mistake and you won’t get that loan. Here we are going to tell you about some smart tips which you need to remember before applying for a loan.

Things you need to give before your business loan gets sanctioned

Loan Application Form: Loan application form will vary according to different lending institutions, but they all end up asking for the same information. So before you fill that loan application form, answer these questions to yourself.

• Why are you applying for a loan?
• How will you use the loan proceeds?
• Who are your suppliers and what all assets will your purchase?
• Who are your creditors and what other business debts do you have?
• Who are the members of your management team?
• Your personal background.

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You would also be required to provide some sort of information on your personal background such as previous address, names used, criminal records, educational background etc. You need to understand this that the lender will give you money only when he is sure that you will be able to repay the loan amount easily.

Resumes: Certain lenders will also be interested in your work history and qualifications, so they will ask for your resume. This is especially applicable if you are starting a new business or taking a business loan for the first time.

Business plan: When you are submitting your loan applications all lenders do require your business plan. Quite often people get confused as to what to include in the plan. Your business plan should include a complete set of financial statements, which includes profit and loss, cash flow and balance sheet. Your business plan should be of top quality and should also include your personal credit report.

Business Credit Report: This one is for those who are already in business. You should always be prepared to submit your business credit report for your business. It is equally as important as your personal report. You should also review your business credit report before you begin the application process.

Income Tax Return: In order to build credibility you are also required to submit your personal and business income tax returns for the previous three years.

Financial statements: You will also be required to submit your financial statements as many lenders require that owners should have 20% stake in the business. In addition to this you will also be required to provide your expected financial statements as a part of your business plan or separately. It is always advisable to keep these documents handy.

If you are preparing your financial statements, the following forms should be used:

• Balance Sheet
• Income Statement
• Cash Flow
• Bank Statements

Accounts Receivable and Payables: A number of lenders require that a business’s current financial position is made clear to them. For this reason it is important that you submit the business’s accounts receivable and payables.

Collateral Documents: When it comes to collateral requirements, it varies vastly from lender to lender. Requirement of collateral documents also depends upon the size of the loan. If the loan size is small then the lender might not require a collateral. But incase if the loan amount is high then you would be required to give a considerable amount of collateral.

Legal Documents: Depending on the loan requirement, the lender might ask you to submit one or more legal documents. If the situation arises where you are required to submit the legal documents, here the following items which you must have:

• Business Licenses and registrations required for you to conduct business
• Articles of incorporation
• Copies of contracts you have with any third parties
• Franchise agreements
• Commercial Leases
• Organizing your documents

When you are running a business, then it is a good practice to keep all the documents handy. It becomes even more crucial when you are applying for a loan. It is your responsibility to make sure that all the documents are in place and that they are orderly and accurate. You must also verify all the information before you give it to the lender.

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