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A Pro guide to Commercial Loans and How to Get One

A Pro guide to Commercial Loans and How to Get One

If you are thinking about applying for a commercial loan to support your growing business, you need to be aware of the different types of lenders before you talk to one. It is worth remembering that commercial loans are more complex than other loans since there are many strings attached to them. They are risky and if your lender refuses at the last moment, you might have to file bankruptcy to avoid losing the huge purchase deposit.

If you are a small business owner who is planning to expand, commercial loans will help you raise the necessary capital for it. When you are looking for commercial loans, the obvious way is by going to a bank. There are other alternatives, but banks still provide the most affordable rates while discussing the terms of the loans when compared to other entities. You should, however, avoid going there without doing some research about it and why you need it in the first place. Majority of lenders will ask you for a commercial loan application. 

The following tips will help you acquire a commercial loan for your business:

1.     Update Your Business Records

If you have an existing business, the first thing that the lender would look at are the financial records. Nothing will leave a worse impression than the fact that your financial statement has not been updated for two years. You should include the business credit reports along with the tax returns of at least three years. A list of current assets and liabilities will help the lender to judge how your business has fared in recent years.

Transparency is mandatory in the financial sector of your business. If you spend time to update your financial statements, your application would be easier to process and have many chances of being accepted. If you feel you cannot do the task efficiently, it is better to seek professional help rather than rue about the missed opportunity later on.

2.     Maintain Good Credit

Besides keeping an updated record of your documents, make sure to pay your bills on time. As you will have to meet a minimum credit requirement,  it is important to have the best credit possible. Make sure you avoid foreclosures, bankruptcy, and delayed payments. This also means you should apply for one loan at a time since lenders often ask for a credit report. Having too many loans at the same time can hurt your chances of securing the loan. The best strategy would be to apply for the loan you have the most chance of succeeding with.

3.     Know Your Loan Requirement

While searching online about how to apply for a commercial loan, it is important to note the type of loan you require in the first place. There is no need to apply for a scrutinized loan like SBA when you require a line of credit which will result in the process being slow and increase your chance of being rejected. It is worth noting that people think that the process of approving loans is expensive and time-consuming, but it depends on the program you apply for. If you are applying for an SBA, the documentation requirement is more stringent and the waiting period is also higher. Instead, you can apply for a line of credit and get the capital early since the documentation process is not that detailed.

 4.   Show Sufficient Cash Flow

If you have an existing business, you must maintain sufficient cash flow. Banks want to see that your cash flow is sufficient for you to pay your monthly loan. Banks will take a look at your tax returns and debts to have a clear idea of your financial situation and whether the business will be able to pay the dues on time. 

5.     Prepare a Business Plan

No business can expect to get a loan without having a business plan. To illustrate, you would not lend money to your friend or colleague without knowing where the money is being spent and neither will the bank. You should have an outline of your business’s plan and purpose and the model of your operation. If you can explain to them what you need the funding for and how you will spend it, you do not need to present over 20 pages of documents. Try to keep it brief and to the point.

6.     Maintain a Social Media Presence

The main reason the loan process is so tedious is that the lender only wants to give money to those borrowers who are low risk and will pay back the loan. Lenders evaluate your credit score and revenues but also your social media presence. Lenders are now using the web to get to know more about their customers. Before applying for the loan you should bolster your online presence and ask your customers to rank your review pages and products which will help you to get the loan. 

Getting a loan should not be difficult if you have the right documents to show your lenders. You just have to make sure you keep a record of all the important things a lender would go through. After the lender sees your business is on the right track, they will definitely accept your loan request.


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