Tips for Applying for a Commercial Loan

Most commercial loan institutions will normally expect an applicant to have collateral or some sort of guarantee in place before they start processing, while others are more liberal. Nevertheless, whether you’re thinking about submitting a commercial loan application to a highly regulated bank or liberal lender (who may not be all that tough on collateral), you still need to put a professional touch to your loan application.

Detailed below are five tips on applying for a commercial loan.

* Make Your Business Plan Loan-Worthy

Whether you’re in the market for a commercial loan to put into a start-up business or expand an already existing business, you need to make your business plan informative, simple to understand, and attractive.

No lender will be interested in putting money in a project that may be unsuccessful. Sweet sounding business prose and sheer enthusiasm won’t be enough to convince a lender; concrete and profitable plans would.

* Search for the Right Lender

Shopping for the right lender is also a must for your business. The most shameful thing you could ever experience is to submit a loan application to an institution that doesn’t invest in your business area or industry. You’ll only be wasting your time; an obvious demerit to your business plans.

You have to choose between investment banks (that offer a $2 million-or-more loan in which they package many single loans together and sell as mortgage-backed securities) and commercial banks that are somehow more attractive with their flexible loan terms.

However, both have merits and demerits and your choice will have to be made taking into consideration what type of business you’re into.

* Get Your Business Documents Ready

Some documents that lenders will want to have a look at before processing commercial loans are your company’s financial statements including balance sheet, income statement, and tax returns (that’s if your already in business).

Your personal financial statements and tax returns for the past three years are also documents that may be needed (most especially in the case of start-ups).A good business plan and details of how the loan will be used are also necessary.

* Make sure you’re Credit-Worthy

Having some savings on hand is also something that can improve your chances when you’re being considered for loan as most lenders consider it a positive factor and think of you as a credit-worthy partner, who knows the value of money and the importance of savings.

Your personal financial statements and tax returns for the past three years will also be studied since how you live your personal financial life can influence your business life.