Applying for a commercial loan and don’t know where to start?
Here’s a guide to forming your commercial loan application checklist for a more seamless application process.
Everything You Need: A Commercial Loan Application Checklist
A commercial loan application checklist can help you gather the necessary documentation to increase your chances of loan approval. Documents and requirements will vary depending on what’s applicable to your business loan type and the lender you apply with.
You need to gather the following when applying:
- Basic Personal Information: Submit your personal information as a borrower for your company.
- Basic Business Information and Permits: Submit your operating address, employer identification number (EIN), and entity type. You must also submit any business licenses and permits to open the business.
- Personal Credit Score: Your credit score can help lenders determine how you’ll manage the business’s finances under your leadership.
- Business Credit Score: Combining your business credit score with your personal credit score can help lenders determine your eligibility for a loan.
- Business and Personal Tax Returns: You must submit two years’ worth to verify your income and revenue stream. Your tax returns should also balance out with your financial statements.
For financials, you’ll be required to prepare the following:
- Cash Flow Forecast: Provide projections of your statements and income of up to 12 months and how your business can earn money from the loan.
- Recent Business Bank Statements: Lenders tend to ask for business bank statements as proof of your ability to repay the loan.
- Profit and Loss Statement: These statements are another way to verify your business revenue.
- Business Debt Schedule: This informs your lender of existing contracts and how you manage them.
Lastly, you’ll have to prepare the following to help expand and round out your application:
- Business Plan: Of course, you’d want your lender to understand your business beyond what the financial statements report.
- Loan Purpose: You must inform the lender of the business loan purpose and whether you plan on using it to purchase new stock or invest in property or machinery.
- Collateral Documentation: You can assure your lender that you’ll be able to pay them back by potentially offering security, such as property, as collateral. However not all loans or lenders require collateral, such as unsecured loans with alternative lenders.
The Commercial Loan Application Process
Applying for the financing you need is doable if you’re prepared.
Here’s a rundown of the commercial loan application process.
Do Your Research
Before applying for any loan, you must gather the information needed to obtain your desired amount.
As a borrower, it’s vital to know the following:
- The business loan you need
- How much you need and can afford to borrow
- What you qualify for
- Why you need the loan
For example, research whether your business needs regular business loans or overdrafts to address any funding requirements based on the amount you’re requesting.
Know Your Competitors
Illustrate what makes you financially viable compared to other businesses in your industry.
Gather any important information your lender may request and show that you can stand out as a business.
Besides your commercial loan application checklist, it’s also applicable to your business plan.
Assess Your Business’s Past Performance
When measuring performance, your business’s cash flow and income may be considered. You need to show if your business is making a profit and what the expenses involved are.
Your lender may look into your financial statements, balance sheet, tax returns, and more to see if you meet their qualifications. Your accountant may prepare them for you.
Know if you’re making enough money and can afford to take on loans before you apply.
You might also be required to provide a copy of your business plan as proof of the information you provide them.
Check Your Personal Credit History
Even if you’re applying for a business loan, you might have to rely on your personal credit history to secure it.
It’s often a reflection of how you manage the business and its finances and your ability to repay debts on time.
You’ll need to show that you have stable personal finances on top of your business’s income.
Know Which Assets Can Be Personal Security
Some assets can serve as collateral to provide better chances of getting approval. Know what you’ll put on the line when you apply for a loan.
Sometimes, the asset you plan to purchase can be your security instead of company income.
Get Your Documents Ready
Ensure that all your documents are prepared for submission.
Have an accountant check your tax returns, income statement, balance sheet, and other financial statements.
Your copy of taxation and property documents should also be updated accordingly.
Get A Broker
Going for a DIY route for your loan application can be more time-consuming and expensive.
Working with a broker is the best way to increase your chances of loan approval.
They can review different loans and lending options for you.
They can also help manage your paperwork, financial statements, bank statements, and other documents for a more seamless process.
Basic Commercial Loan Requirements
You need to include the following documents in your commercial loan application checklist:
- Identification documents
- Completed and signed application forms
- A copy of your contract of sale for your commercial premises
- Quotes for the company’s machinery, vehicles, and other equipment
- Two years of business financial records
- Two years of personal financial records
- A copy of your business plan and financial projections
- Market and competitor assessment
- Documentation for the personal assets you might offer for loan security
Additional Loan Requirements for Different Loans
Some lenders might require additional documents from you to approve your business loan. These include the following:
- 18 years old or older
- Australian resident
- Documents supporting refinance (if relevant), including credit card statements and lease repayment schedules
Frequently Asked Questions
You may have more questions about constructing your commercial loan application checklist.
We’ve answered the most common ones.
How Long Does It Take to Apply for a Commercial Loan?
It usually depends on the type of loan you’re applying for.
A commercial loan can take from a few hours to weeks or even months to get approved.
Are There Additional Fees When Applying for a Business Loan?
It usually depends on the lenders’ requirements and policies. Some scenarios can incur a fee, depending on the liabilities involved.
You can speak to the lending company about their policies for more information.
How Many Years Can I Get a Commercial Loan For?
It depends on the kind of business loan or financing you’re applying for.
You can usually get loan terms from a few months to 25 years, depending on the amount and what your business can pay.
Your loan can be revised, and a new term can be negotiated.
Looking for business finance can be tricky, especially when you don’t know where to start.
This commercial loan application checklist gives you an idea of what to provide as part of your business loan application.