Are you thinking about obtaining a loan this year? It involves preparation, determination of the precise borrowing causes and needs, and deciding on the appropriate lender. Below are six key steps that can help you make loan sourcing as easy as ABC. Start by gathering the following information, make copies and file them in a pocket folder. In certain cases it may be necessary to scan and save documents with password protection just in case lenders request for emailed copies. Faxing documents is safer than emailing. You may also share the documents using cloud providers such as Dropbox, Google or Microsoft’s OneDrive. These are fairly safe methods of providing access to documents online.
1. Financial Information
- 3 years most recent business tax returns and/or audited financial statements
- 3 years most recent personal tax returns
- Personal financial statement
- Year to date revenue statement
- 2 years financial projections taking into accounts the proposed borrowing
- 2 years monthly cash flow projections
- Accounts receivable and accounts payable aging lists
- At least 3 years most recent bank statements
- Business history and challenges, ownership and affiliations
- Short personal resume
2. Credit bureau report
- Check your credit report to ensure there no damaging remarks
3. Licenses and permits
- Ensure that your licenses and permits are current
- Most lenders will require collateral for loans. Having narrowed down your loan needs, you should line up the collateral that you will pledge to secure your borrowing, Different loans require different collateral. For example, a long-term loan is secured by long-term assets such as land, real estate or machinery while short-term loans are secured by short-term assets such as equipment and current assets. If your collateral is real estate or large machinery, you will be required to have the property or machinery appraised by a bank’s approved appraiser if the loan is approved. A clean environmental impact report will also be required by bank prior to closing
- Pre-qualify yourself by analyzing your financial statements to ensure you have the capacity to borrow and repay the proposed loan. Think through the risks associated with the loan from the lender’s perspective and be ready to provide convincing mitigation and o secure the loan appropriately. This process can be daunting and may require help of an experienced loan packager.
6. Choose a lender
- There are numerous lenders out there. If you are financially strong, you should link up with a conventional lender in your neighborhood. They know and understand the community well. But if you exhibit some financial weaknesses or are in need of fast cash, go for private money lenders. They are fast and easy to deal with. The process of loan-shopping can be time-consuming. You may want to seek help from a seasoned professional to place the loan for you.