The process of applying for and receiving business loans has some similarities with applying for a personal loan. There are some pretty important differences as well. The lender looks at your personal credit history before making a decision, as they would if you were applying for a personal loan. Lenders also want to see a business plan, which tells them what you will do with the money if you receive it.
Credit History Is Important
While your business may be a limited liability corporation, which means you are not personally responsible for some or all of its debts, lenders still need to know whether or not you are a good person to lend to. If you have poor credit, you may not be able to get a traditional business loan. The lender will also check the credit of the business itself if it is already established and has been in operation for a period of time.
In addition to checking your personal credit, the lender may also perform a background check on you and others involved in leading the company. You may need to provide your income tax return as well. The lender may also want to review the resumes and qualifications of those involved in the business to make sure there is sufficient experience.
You Need a Plan
A lender won’t let your business borrow money without a business plan. An excellent business plan not only tells the lender what your business’ mission is and what it will do, it also includes financial data, such as profit projections and cost projections. The plan should explain how much of a loan you are seeking and detail how the loan will be spent. A lender needs to see that your business plans on making money and ultimately repaying its loan.
Read part one in the series by clicking here