Here are some common questions that small business owners ask when preparing to find financing for their company:
Q: What documents will I need when applying for the loan?
A: Different lenders and types of financing may require slightly different documentation, but you’ll find the list is largely the same. According to the U.S. Small Business Administration, here’s a rundown of what you’ll need to have available when you apply for the loan..
– Personal background information, including previous addresses, former names, any criminal record, and educational background.
– Resumes, particularly if the loan is to help start a new business.
– Business plan, which all loan programs require alongside the application. This should include projected financial statements.
– Personal credit report, which you should obtain from all three major consumer credit rating agencies prior to submitting the application. Any inaccuracies or problems on your credit report will affect loan approval, so correct any inaccuracies before you apply.
– Income tax returns, as far back as three years.
– Financial statements, particularly for business owners with more than a 20% stake in the business.
– Bank statements, typically as far back as one year.
– Collateral, which varies greatly depending on the lender. Loans with greater risk factors may require significant collateral. Solid business plans and financial statements can show a business to be lower risk and can help alleviate the need for any collateral at all. Regardless, be prepared with documentation of collateral that you can offer.
– Legal documents, such as business licenses and registrations, articles of incorporation, contract copies, franchise agreements, and commercial leases.
Q: What questions will a lender ask me?
A: Again, this varies depending on the lender, but, according to the SBA, the following are some standard questions for which you should be prepared,.
– Why are you applying for this loan?
– How will you use the loan proceeds?
– What assets do you need to purchase, and who are your suppliers?
– What business debt do you have, and who are your creditors?
– Who makes up your management team?
Q: What questions should I have for my potential lender?
– What specific requirements does the bank have when applying for a loan, such as minimum credit score or cash flow?
– What are the rates and costs associated with this loan?
– Is the bank prepared to address my needs?
– What risks are there with regard to loan repayment? And how can these risks be managed?
– If I die, how will the loan be repaid? Will it affect my family?
– Does the loan have a prepayment penalty?
When you are looking for alternative financing for your business, and have questions, contact one of the Crestmark lending experts at 888-999-8050!