The Steps to Business Finance Approval
The business loan application process is fairly straightforward, however, it can be intimidating to individuals that are new to the process. Although specific steps can vary from lender to lender, and business to business, most business and commercial financing will follow a similar process.
Business owners will have a easier time engaging with the business loan application process when they know what to expect and have prepared the appropriate information and documentation.
Step One: Speak with an approved credit adviser.
Having a one-on-one discussion with a credit expert can assist borrowers quickly identify eligibility for the different types of business loans, leases, or line of credit products that are available to suit the unique needs of their business.
The credit adviser can also recommend a specific lender based on the individual business’s scenario, and assist the borrower estimate how long it will take to obtain the funding, especially if time is critical.
Step Two: Apply for the loan or lease.
A credit adviser will help with loan or lease application and verification documentation including a business profile.
In general, the business profile should include: the type of business, the company’s annual sales, the total number of employees, an income statement, information regarding the length of time the company has been in business, and details about recent ownership history.
A lender will also want to see a business plan, particularly for a start-up company, and will also require personal financial statements and available business financial statements.
If the loan is secured, the borrower will also need to furnish information about the collateral being offered. Collateral can potentially include personal real estate, property, business equipment, accounts receivable, inventory and supplies, or business real estate. The credit adviser will have access to a number of potential financiers and their requirements.
Step Three: Wait for the lender to assess documentation.
The lender will then verify the documentation authenticity and investigate the applicant’s credit file, credit rating and background, as well as the financial history of the business.
A credit adviser will provide updates as and when necessary.
Step Four: Receive loan approval or otherwise.
After assessing the application, if approved, the borrower and lender will sign all necessary paperwork, then the funds are disbursed or the loan settles (if for a property purchase).
How long does approval take to obtain a business loan or lease?
The length of time to approve a business loan will depend on the chosen lender and the business’s unique circumstances.
Approval can be completed within a matter of days, or can take up to several months, depending on the complexity of the transaction.
A credit adviser will be able to assist borrowers estimate the length of time to obtain loan approval at the outset of the application process.
What types of business loan and lease financing are available?
The majority of funding today is secured. Although specific financing offers will vary, most lenders offer a variety of financing options for business owners.
Below are a few of the most common financing options:
- Start-up financing
- Business growth financing
- Debtor/inventory financing
- Motor vehicle financing
- Equipment and plant/tools financing
- Business property financing
- Trade financing
What is my business’s borrowing power?
Borrowers with a good credit rating, good security offering, and supporting their application with good background and financial history or projections will have a better chance of success with their application.
How long will I be given to repay the loan?
Generally, business loans are set for a term of one to fifteen years, however, this can vary from lender to lender. The amount of money being borrowed will also affect the repayment term of the loan.
Some lenders will offer business loans against residential property as security a term as long as thirty years.
A loan can also be structured on an interest-only basis, but be cautious as the principal will still be owed at the maturity of the loan.
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