There is a very wide gap of requirements between the solicitations for personal loans and business loans. Business loan requirements depend solely on the lender, since it involves more risk for them.
Essential fact to know
Hence, a thorough and longer application process is required to ascertain the eligibility of the borrower. It would therefore be required of a business owner to gather financial information relating to them as individuals and their business.
As an entrepreneur, if you’re looking to apply for a loan or have thought of it, you would want your loan application to be considered and accepted. Because the better the application, the greater your chances of acquiring it.
Here, in a bid to assist you with the right armory, we have put together important tips and strategies to assist you in getting the finance you need.
Time in Business
One of the most commonly asked questions by lenders is, “how long have you operated your business?” The longer the duration the greater your chances, since almost 20% of businesses tend to fail within the first year. A long time in business proves that your business has stood the test of time and has a feasible success rate. For best financing option check out https://www.mortgageadvisorygroup.net/the-best-financing-options-for-small-businesses-in-2020/
Lenders customarily requests and examines the personal credit score of borrowers, especially for small business. But for old businesses, your personal and business credit score would be required.
A stellar credit score of 700 and above confirms your financial health and gives you a wide range of business loans to choose from. Whereas, a low credit score below 600, limits your options.
Lenders want to know how much you can make a year. They often require that you meet a minimum level of income per year before being considered for a loan. The higher your annual income, the greater your chances of acquiring a loan. Click here for more information about annual financial reports.
Personal Debt to Income Ratio
Evaluation of personal debt to income ratio might sound counterintuitive, but it is something that most lenders require. Most lenders will consider a high ratio too risky to loan. So, to be on a safe side, a lower ratio is considered the best.
This is required by lenders to confirm the accuracy of your personal and business accounting documents. They usually request for copies that dates back to a year or even longer. This gives them an idea of how well you can handle the money.
Collateral is another requirement for business loan qualification. If you’re applying for a loan, you might want to identify a collateral, as secured loans are always backed up by one. Collaterals are usually fixed assets. The presence of one, gives the lender a sense of security.
With these tips, you should be able to prepare outstanding loan applications that would be considered by lenders for approval. The conditions of the lender should also be taken into great considerations, as they have the final say. Business loans doesn’t always come easy, so keep applying for that loan and never give up!