Ready to see how
much you qualify for?
Let's get started
If you're a small business owner looking to take out a loan, it's important to understand how lenders will review your application. Lenders will generally look at three key factors when considering a loan: creditworthiness, collateral and capacity. In this blog post, we'll discuss the three main areas that lenders focus on when reviewing a business loan application.
If you're a small business owner looking to take out a loan, it's important to understand how lenders will review your application. Lenders will generally look at three key factors when considering a loan: creditworthiness, collateral and capacity. In this blog post, we'll discuss the three main areas that lenders focus on when reviewing a business loan application.
Financial History
Lenders will consider your capacity to repay the loan. They'll want to see evidence that you have the ability to make the monthly loan payments, even if your business hits a rough patch. To show capacity, lenders will look at your business's cash flow. They'll also want to see evidence that you have a solid plan in place to repay the loan. They'll also want to see evidence that your business is generating revenue and is therefore able to repay the loan. Lenders will take a close look at your business's expenses to make sure that the loan amount you're requesting is appropriate. Be prepared to provide detailed financial information, such as tax returns, profit and loss statements, and balance sheets.
Collateral
Another important factor that lenders will consider is collateral. Collateral is an asset that can be used to secure the loan in case you default on the repayment schedule. This could include real estate, vehicles, equipment, or even inventory. The more collateral you have, the higher your chances of getting approved for a loan. Keep in mind that if you do default on the loan, the lender can seize your collateral to recoup their losses. Not all loans require collateral, however. Some lenders may be willing to approve your loan based on your creditworthiness and financial history alone.
Creditworthiness
Lenders will also look at your creditworthiness when considering a loan. Your personal credit score will also be taken into consideration when lenders review your loan application. A high credit score indicates that you're a reliable borrower who is more likely to repay the loan on time. Conversely, a low credit score could indicate that you're a higher-risk borrower and may be more likely to default on the loan. If you don't have a strong credit history, you may still be able to get approved for a loan if you have strong collateral or a co-signer with good credit.
How to apply for a small business loan?
If you're a small business owner looking to take out a loan, there are a few things you need to do in order to prepare your application. First, you'll need to gather financial information such as tax returns, profit and loss statements, and balance sheets. You also should check your personal credit score to see if you're eligible for the loan. Once you've done all of this, you can then fill out a loan application and submit it to the lender for review.
What if I'm denied a small business loan?
If you're denied a small business loan, there are a few things you can do to try and improve your chances of getting approved. First, you can try applying for a different type of loan such as an SBA loan. You can also try working with a cosigner or guarantor who has good credit. Finally, you can try collateralizing the loan with an asset such as real estate or equipment. If you do all of these things, you should have a much better chance of getting approved for a small business loan.
Bottom Line
When applying for a business loan, lenders will focus on three main areas: your financial history, collateral, and credit score. If you're able to provide positive information in all three of these areas, your chances of getting approved for a loan are much higher. However, even if you don't have perfect credit or ample collateral, there are still options available to help you get the financing you need for your business.
If you're a small business owner looking for financing, National Legacy Capital Group specializes in working capital loans, business lines of credit, and equipment finance. We're here to help you get the funding you need to grow your business. Fill out our online loan application today and one of our loan specialists will be in touch to discuss your options
