Applying for Commercial Loans
Small business owners are still having trouble in getting commercial loans in spite of the attractive interest rates available in the market today. Financial institutions are aggressively offering packages on home-equity credit lines and other loan assistance.
Although there are numerous loan packages offered out there, financial institutions are still very discriminating when it comes to lending money. They don?t lend money to random people. Banks are selective when it comes to business loans.
If you?re one of those small business owners who wish to develop and expand his business but lacks capital to do so, then taking a commercial loan could be a solution for you. The challenge in applying for a commercial loan is in making sure that your application gets approved.
The first step in getting a commercial loan is finding the right bank or credit union. Lendio can help you secure commercial loans with banks and other lending companies.
When it comes to getting successful loan applications, there are no magic wands or magic potions to make things easier and fail-proof. However, there are some tips and guidelines to help small business owners like you ensure that you have a huge chance at getting your commercial loans approved.
1. Be organized even if you?re not. This is critically hard especially when you?re trying to develop your business and when you?re altering your business? internal organizations to achieve a certain growth. Looking sharp is essential when it comes to getting your commercial loans approved. Most financial institution appreciates and recognizes a well-organized package. Make sure that you have all your documents updated and ready for presentation. Documents usually include tax returns, an interim financial statement, list of account payables and account receivables, insurance records, and a cash-flow statement.
2. Assets. Financial institutions want to tie-up more assets than the commercial loans are worth. Lenders will assess your assets not in terms of how much they were worth when you acquired them. Rather, lenders will look into what and how much they could be sold for in case the business is ever to be shut down.
3. Improve your loan-to-value ratio. Industry by industry, loan-to value ratios differ. For example, leasing companies have higher acceptable loan-to-value ratios. There is no precise bar for loan-to-value ratio. What financial institutions are looking for is an assurance that your small business can succeed through recessions and a few difficult days.
4. Total debt coverage. Show the banks that your business can?t only pay the interest of the loan, but can actually cover the whole debt. It?s not enough to show that you have the capacity to produce enough money to pay off the monthly interest on the loan. Lenders nowadays, want to see that you?re more than capable of paying off the interest of the loan. They want to see that you can actually pay back the principal amount.
5. Hold back. Financial institutions say that good personal credit can be beneficial with a commercial loan because small business owners have to personally guarantee their loans. Moreover, some bad marks on your personal credit history could also hurt your application. So if you have a bad mark, or you missed some payments or have credit troubles, you can hold off your commercial loans application for a while. Clean your personal credit history first because doing so can make a he difference when applying for that business loan.
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Source: http://plusstuff.com/2012/03/applying-for-commercial-loans/
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