Without regard to the type of loan you apply for, like a commercial short term loan, real estate financing, an equipment loan, a home equity line of credit, a business working capital line of credit, or any other kind of consumer or commercial loan, there are certain rules and regulations that remain common to most of the loans with bad credit types. The most typical features a lender will look for include the following:
- Credit history or credit rating of the borrower
- Availability of collateral to be used as security for the loan
- History of cash flow and business projections
- Documentation of the loan
- Character of the borrower
When it comes to applying for a business loan, the lender will first look for a decent commercial credit. If you have been running your business for quite some time now, then you should first take steps to review the credit report of your business, before actually applying for commercial credit. A free Business Information Report can be obtained from Dun & Bradstreet (D&B), a public company of the US that licenses important corporate and business information for using in making credit decisions at facebook.com/realisticloans .
If the company does not contain any information about your business, yet, you can still get a listing voluntarily by issuing their authorities some fundamental details pertinent to your business. Most traditional lenders will usually look for trade experiences of a minimum of 4 or 5 that has to be listed on your business report, before they take into consideration the creditworthiness of your business.
Basically, collateral is an asset or property of yours that will secure the loan you take out. If by any chance you fail to pay back the loan amount, the lender will be able to sell the property you placed as collateral in order to obtain the remaining unpaid loan amount. The loans that are offered by receiving a property or asset as collateral are generally referred to as secured loans. When a lender expects you to pledge one of your properties or assets as collateral, they are just trying to minimize the risks they would encounter.
The most important factor for acquiring a short term business loan is the cash flow of your business. The primary concern of your lender would be whether the daily operations of your business will bring about enough money for you to pay back the loan amount on time.
Some of the important documents that you would need to produce when applying for a business loan include the following:
- Your personal income tax returns for 1 to 3 years and your personal finance statement
- Projected estimates of startup cost
- Projected statement of cash flow
- Projected income statements and balance sheets
- A detailed business plan
- Breakeven analysis
Following are certain traits that are considered to be important by a bank when it comes to analyzing your character:
- Successful previous business experience
- References from professionals like business advisors, lawyers, accountants, etc.
- Relationship with the lender, either present or past
- Community involvement