Welcome back to Financial Fridays, where we tackle a financial topic that entrepreneurs and technological business owners will likely run into as they grow and expand. This time, we’re discussing loans. Sure, they might not seem as “fun” to receive as a pitch competition prize. But for safe, steady, and necessary growth, there’s no better way to do it.
You will likely apply for at least one loan in your lifetime. Many people think that you simply walk into your local bank, sign some papers and right there you are given a check with your desired amount. Unfortunately, the real world doesn’t work that way. Banks have a long checklist of requirements for before, during and after you apply for a loan and you must be diligent with these requirements or risk jeopardizing your standing with the bank.
There are different requirements for different kinds of loans. When you are applying for a business loan, you are asking that loan officer to lend you money on the understanding that your business will produce the capital to cover your expenses and ultimately repay that loan. This can be a difficult concept for many lenders to believe because so many businesses, especially small businesses, fail within the first few years. But there are a few factors that could persuade a bank into realizing your creditworthiness:
- Show that you have experience in running a business, handling revenue, and managing finances. Provide specific cash flow projections and a detailed business plan to show lenders that you are familiar with the inner workings of a business and have the skill set to repay the loan.
- If you do not have experience in running a business, show your experience in a venture similar to the one you are requesting a loan for. Show personal character to provide loan officers with a more subjective view of you as a loan applicant.
- You’ll need to provide proof of sufficient assets, substantial financial reserves and some form of personal collateral in order to be approved for any type of business loan.
When you are applying for a personal loan, the requirements for applicants differ slightly from that of a business loan. You should know your credit store and your credit history prior to applying for the loan. These two factors will be what banks look at first. You can apply for a credit history and score before beginning the loan process so that you can see what you lender will be seeing as well as have time to correct any mistakes.
However, you as the applicant should be doing your own research as well. You should be looking at all of the possible options and packages for a personal loan and what other companies and banks are offering as well. You need to understand your limitations in terms of repayment such as: the amount of interest you can comfortably pay, the amount for down payments, and other factors like APR and loan processing fees. Research whether they have features you’ll need, like online banking, or 24/7 customer service. Being as informed and realistic as possible is going to help you and your banking officer provide you with the right loan for your lifestyle.
Applying for loans can take longer than you might anticipate and the process may be a bit more tedious than expected but if you can be patient and diligent with your paperwork and research, you can receive a realistic loan and begin financing your future endeavors.
This article written by Morgan Bachemin in association with Hibernia Bank. The views expressed herein are those of the author and not necessarily those of any financial institution or bank. This article is intended to provide those reading it with information about matters of current interest. It should not be construed as legal or financial advice concerning a specific topic and should not be acted upon without contacting the appropriate professionals.