When you apply for a business loan, your banker will assess your business to determine whether or not you are a good credit risk. Here are some things that your banker will be looking for when assessing your business for a loan:
- Credit history: Your credit history is a key factor in determining your loan eligibility. Your banker will review your personal and business credit scores, as well as your credit report, to get a sense of your creditworthiness.
- Financial stability: Your banker will also look at your business’s financial stability, including your revenue, profits, and cash flow. They will want to see that your business is financially healthy and able to make regular loan payments.
- Business plan: A solid business plan is essential when applying for a business loan. Your banker will want to see that you have a clear plan for how you’ll use the loan and how you plan to pay it back. Be sure to include details on your target market, financial projections, and marketing strategy in your business plan.
- Collateral: Some lenders may require collateral, such as assets or property, to secure a loan. Your banker will assess the value of your collateral to determine how much they are willing to lend you.
- Personal guarantee: In some cases, you may be required to provide a personal guarantee to secure a business loan. This means that you are personally responsible for repaying the loan if your business is unable to make the payments.
By understanding what your banker is looking for, you’ll be in a better position to prepare for the loan application process and increase your chances of getting approved.