In the recent past, bank lending has been tight. In fact, the majority of business owners now think that they are not likely to qualify for a loan. The reason for this is the recent financial crisis, which has changed the lending industry. Financial lenders and banks do not easily approve your banklån simply because you have a novel idea or a big smile. You need to work for it and apply. Therefore, to increase chances of your loan to getting approved, you need ways to make sure your business is noticed. It needs to stand out above the rest.
Choose right lender or bank
Not all lenders that can emerge from the financial mess they ran into. Some have completely changed their lending criteria. In fact, some have vowed not to lend small and mid-sized businesses. They are now focusing on top-tier companies with low risks. Others are giving loans out to business operating in certain industries or have collateral. On the other hand, some are out of this lending industry.
Guarantees and Collateral
The majority of the banks are now focused on repayment. Thus, they look at your current cash flow. However, this is not adequate now. They are looking for additional means of payment from sources such as valued collateral or personal guarantees. In fact, collateral is now the key to lending market. A person who is serious about his or her business will not have any problem putting up some collateral against a loan request. The collateral offers a lender an additional source of repayment and gives a loan officer an impression that you are serious. You need to understand that collateral has its value. Lenders and banks do not look at the amount you paid for the property or equipment. Rather they look it at the value, which it can be sold quickly.
Tax returns and financial statement
Lenders will not believe your story without a financial statement from a bank. You should understand that stated income loans are now a thing of the past. Banks are interested in completed tax returns and audited financial statements. These documents provide your bank a ground to make a decision and validate your business potential.
Some banks can contact both suppliers and customers to check the validity of the information presented in your loan application documents. Therefore, do not start the application without knowing your documentation well. Other than the tax returns and financial statements, loan application ought to include formulated financial forecasts. This will show them your management ability strength.