How to Apply for a Commercial Loan
Obtaining financing is essential to the success of any business, whether it is new or has been established for a number of years. While there are a number of financing sources available, a business must take specific steps before applying for a commercial loan to increase the likelihood of being approved.
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Things You'll Need
- Company business plan
- Company's latest financial reports
- Company credit report
- Personal credit reports of any partners
Instructions
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Applying for a Commercial Loan
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1
Determine exactly why you need a loan. This may seem like an obvious plan of action, but some businesses feel as though it would be nice to have money in reserve but have no real plans for the financing. Your lending institution will want detailed information as to what the money will be used for.
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2
Determine the amount of your loan. This does not need to be an exact amount but should be close to the estimated amount you need based on your reasons for needing a loan and your business's research.
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3
Contact the Small Business Administration for advice and counseling before applying for the loan. They will direct you to a counselor or refer you to another group, such as SCORE or the SBDC (Small Business Development Center), in your area.
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4
Order and review your credit reports. If your business is less than three years old, the bank will look at the personal financial reports of all of the business owners. Make any necessary corrections to those reports.
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5
Review and/or prepare your business plan. Established businesses should have a plan in place already, but new businesses may need to prepare one. Your business plan will help you to determine how much money you need and how fast you will be able to earn the money needed to repay your loan.
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6
Survey the banks in your area to determine which offer commercial loans. Include not only large banks in your search but smaller banks and credit unions as well. Have more than one application prepared so that if your first choice denies your loan you can submit your application to another lender.
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7
Prepare the presentation package you will give the lenders. Your package should include as much information as possible to aid the lender in making his decision. Include an executive summary, financial statements, charts, and a copy of your business plan. Prepare a few visual aids as well in case you are able to make a personal presentation.
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8
Set appointments to meet with the commercial lenders at the financial institutions you have chosen to apply to. Utilize the presentation you have organized to make your loan application in person and answer any questions the lender has regarding your plans.
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Tips & Warnings
Be patient. Not all lenders can make instant decisions regarding your loan. Be as organized as possible. If your presentation is unorganized,the lender will assume you are not responsible enough to handle the loan you are requesting.
Do not assume that the first financial institution you visit will approve your loan. Have a backup plan in place and continue to apply until you find a financial institution you can work with.
