10 Things Lender’s Will Ask When You Need a Business Loan

This is the age of opportunities, where new start-ups are coming up every day to make the life of everyone easier and provide them access to the best services. While some start-ups strive to become giants, others lose the battle midway due to financial constraints. If you too have a dream and are looking to fulfill it, then opt for a business loan to ensure you are not facing any capital crunch.

There are various lenders available online, offering a business loan to individuals based on their age, business plan, revenue, and many more factors. If you too want to apply, let us look at 10 things that the lenders will ask you before providing a business loan.

10 Things lender’s Will Ask When You Need a Business Loan

When you apply for a business loan, here is a list of information that you can expect the lender to ask you for. While this list is not exhaustive, it is the primary requirement.

  1. Collateral for loan: Business loans are both secured and unsecured. If you want to opt for a secured business loan, the lender will ask you for security or collateral against which you will be offered the loans. You can either pledge your business asset or any personal asset.

  2. Business Plan: Most lenders require a business plan document for a business loan. The document does not have to be elaborate, instead, it can be a short or lean business plan with the standard summary of the company, product, market, team, and financials.

  3. Business financials: The financials will include both the current and the past loans or debts incurred, along with the bank account details, investment information, and supporting documents like tax ID numbers, addresses, and complete contact information.

  4. Account Receivable and Payables: The lenders also look for the account the credits and debits of the organization to help understand the revenue. This provides better clarity about the repayment capacity of the business loan.

  5. Insurance Information: To reduce the risk, lenders also ask the new businesses for insurance documents in case any of the founders die. In such cases, the fine print will direct the pay-out to the bank first.

  6. Agreement on future rations: The lenders and the applicant agree to keep some key ratios—quick ratio, current ratio, debt to equity, for example—within certain defined limits. If even the ratio is not maintained, then you are in default of the loans.

  7. Copies of part return: The lenders also ask for corporate tax return documents. It helps them in getting a better understanding of the business, thus proving the creditworthiness of the business.

  8. Personal Finance details: Apart from the information about the business, the lender also requires your personal information like social security numbers, net worth, details on assets and liabilities, etc. For multiple owners, the financial statement of all owners is needed.

  9. Financials statements: A financial statement of your business is required, preferably audited and reviewed by some Chartered Accountant. This will include your business assets, liabilities and capital, and the latest balance sheet. The profit and loss statement of the past three years must be available.

  10. Personal information: To ensure complete transparency, the lender will ask for the personal details of all the business owners. You are required to submit the details with all the necessary verification proof documents. The CIBIL score of the owner will also play a major role.

Conclusion

The above details are some information that the lender would require from your end to reduce the loan risk and ensure that you do not default. These will also be a major deciding factor in fixing our interest rate and loan tenure, through which you can also calculate your EMI through the business loan EMI calculator. So, you can also try to get all your documents in place, before you apply for a business loan, reducing your application rejection chances.