Preparing to Apply for a Business Loan
By Craig Gocken
There are times in the life of a business when applying for a business loan makes sense. This may be at the very beginning, when the business is just getting started, or at a time of growth or expansion into a new geographical area, a new market, or a new product offering. Whatever the circumstances, a business loan can provide the capital necessary. Applying for a business loan can be intimidating, but going through the process gives business owners a good opportunity to make sure the business is in good shape and take a look at where it is headed.
Check Your Credit Score
Some numbers are very important and credit score is one of them, especially when you are applying for financing. Most banks will look at the business credit score as well as the personal credit score of the business’s owners. Every lending institution will have their own standards for credit score which borrowers must meet. Obviously, the higher your credit score is, the better your chances will be to secure financing.
Make Sure Legal Documents Are in Order
There is much more to starting and running a business than just opening your doors and letting your neighbors know. The right documents must be filed with the state, business licenses must be obtained when applicable, and of course taxes must be correctly filed. It is imperative that all this is in order, and applying for a loan provides an opportunity to double check that you’ve done everything by the books.
Assess Your Business Plan
Having a formal business plan is not always required to secure financing, but it is probably a good idea to have one anyway. A business plan helps you to think through the basics of your business, including your projected financials, as well as how you plan to use the requested capital if your loan is approved. Sometimes just going through the exercise of completing a business plan may cause you to change direction or revise your plans.
Our Commercial Loan Application Requirements
If you are considering applying for a commercial loan, Federated Bank offers flexible business loan options. To be considered for a commercial loan, you must complete the loan application and personal financial statement. In addition, we require the following documentation:
- Past 2 years complete tax returns and/or W-2 forms for all borrowers
- Recent pay stubs covering at least 1 month and including year-to-date information for all borrowers
- Last 3 months of bank statements for any account not at Federated Bank
- Statements on any brokerage accounts, 401(k), profit sharing, pension, cash value of life insurance, or any type of asset for which any borrower receives periodic statements.
Self-employed borrows also must submit the following:
- Past 2 years personal tax returns with all schedules (if sole proprietor)
- Past 2 years business tax returns with all schedules
- Year to date profit and loss
- Year to date balance sheet
- List of outstanding receivables
If you have questions about our process or whether a commercial loan is right for your business, come in and talk with me or any of other lenders. We are here to help!
