9 Steps to Apply for a Commercial Loan

The credit market is getting tighter and

tighter

It’s becoming ever harder to obtain

funding

It’s becoming ever harder to obtain

funding Especially with the dwindling home equity values which is traditionally the main source of personal funding for loans

So what options are left for obtaining

commercial loans?

Step 1: Check Credit Report•Your credit rating is a leading influential factor in the loan qualification process•Even if you have the best borrowing, repaying, and money management habits, your credit report may have a few surprises•Check your personal credit report as the owner of the business and the business credit report for errors•Report errors and try to correct them before approaching lenders for new loans

Step 2: Evaluate Long Term And Short Term Financial Position

• How is your business doing financially at the moment?

• How has your business financial health been in the past?

• What are your financial short term expectations for your business?

• What are your financial long term expectations for your business?

When evaluating your financial position, you have to ask yourself the following:

• What equipment do you need?• How long do you intend to run the equipment?• Are there tax benefits you can take advantage

of?• How will the new purchases affect your

business cash flow?

Step 3: Get Advice• Before you think of getting a loan, get qualified

advice from business experts • Talk to a financial consultant, a management

consultant, a qualified accountant, or your banker• Talk to the Small Business Administration (SBA) on

ways to get loans and how to manage business loans

• Get expert business counseling from groups such as the Service Corps of Retired Executives (SCORE)

The qualified advice you should seek include:

• Advice on how to source business loans• Advice on how to manage business loans• Advice on how to make a comprehensive business

plan• Advice on how to implement business strategies• Advice on how to avoid taxation problems• Advice on how to take advantage of tax breaks

Step 4: Prepare A Business Plan• Before talking to your lenders you need to have a

plan on how the commercial loan will benefit your company

• You need a comprehensive business plan that outlines how your company will benefit

• Your business plan should clearly spell out what additional gains you expect

• The business plan should include a workable and sustainable loan repayment plan

If you need help with making your business plan you may:

• Consult the SBA

• Consult SCORE

• Consult Women’s Business Centers (WBC’s)

• Hire a small business consultant

• Check for free and paid templates online

Step 5: Determine Your Financing Needs

Once you have a complete business plan, you need to determine how much you need

• What does your business need to start, grow, or operate at a profit?

• Do you need any new equipment?

• Do you need new staff?

• Do you need new premises?

• Do you need new advertising, marketing, or sales campaigns?

As you analyze your financial needs, ask yourself the following:

• Will the loan meet those needs?• Will the business benefit from these financial

needs?• Exactly how much do you need in terms of

new financing?• How long will it take to meet the goals set to

be achieved by borrowing the loan?

Step 6: Explore Lending Options

• Who is in a position to lend your business the funds it needs?

• Which lenders give the best terms when financing businesses such as yours?

• Which lenders do you already have a working relationship with?

• Which lenders can afford to finance your kind of business at the scale you are seeking?

As you explore lending options, these are some of the lenders you need to look at:

• Commercial banks

• Credit unions

• Mortgage companies

• Credit card companies

• Peer to Peer lenders

• Friends and family

Step 7: Research Loan ParametersYour next step is to find out the terms and conditions of the lenders• How much is the maximum and minimum amount you can expect from

each lender?

• What are the minimum requirements to qualify for a commercial loan?

• Do you need to come from a certain geographical location?

• Do you need collateral?

• Do you need to have been in operation for a particular amount of time?

• Do you have minimum and maximum repayment periods?

• Do you need other signatories or guarantors?

Step 8: Send In Your Application• Finally you are prepared and everything is in place

• Fill in all the necessary forms

• Attach all relevant documents

• Get all necessary signatures e.g. from business partners

• Include copies of any business licenses that may be needed

Step 9: Make An Appointment And Plan Your Presentation

• Loan officers get lots of financing requests every day

• Make a professional package with compelling content

• Include a great executive summary that is brief, concise, and conclusive

• Make an appointment so you can do a short face to face presentation

• Include visual aids to make your presentation interesting

• Do not overlook necessary documents. Include bank statements, business projections, graphs, charts, and accurate financial statements.

To make a good impression with the loan officer and increase your chances of obtaining a commercial loan remember to:

• Be honest• Be organized• Be confident• Be direct• Be interesting• Be formal• Be knowledgeable

Take Advantage of Competition• Even though the recession is still on, lenders are still

willing to give money to businesses• As a commercial borrower, you need loans that come

with easy terms and conditions• Show each loan officer a comparison of what other

lenders are willing to offer you• This may lead the loan officer to approve better

terms for your business financing• Do not make a final decision before reviewing what

different lenders are offering

Customize The Loan To Fit Your Business

• If your business has low and high seasons seek out a loan with a seasonal payment plan

• This means you can pay full installments when business is good, partial installments when business is fair, and get payment holidays when you get to pay nothing at all

• Ask for a step-down payment program where you get to pay higher rates when your revenues rise

Things To Avoid•Do not procrastinate: Business opportunities are time sensitive. Apply for your loan now when the opportunity for growth still exists

•Do not under-estimate: Taking on a small loan for a big project will result in an incomplete project that cost you money but cannot earn revenue

•Do not over estimate: Taking on a big loan for a small project will result in huge installments that cannot be serviced by the project’s small earnings

•Do not fail to plan: This will very likely result in lots of wastage

•Do not fail to implement: Changing your business plan on a whim will result in many of your goals and targets not getting achieved

Prepared by Banking - NewsTipsTricks