Applying for a bank loan is associated with many things. Filling out paperwork isn’t enough to get approved for a bank loan. Below you can find 10 important points to focus on before applying for a bank loan.
- Do You Qualify for a Bank Loan?
If you see you cannot qualify for a bank loan, applying for it will hurt your credit. Find out the requirements of the bank beforehand. Most banks will tell you the lowest credit score, the cash flow and other qualifying factors they require.
- The Amount You Need
Make sure to know the exact amount you need. You can do this based on your monthly cash-flow projection. Also, the bank will want to know how you’re going to use the funds.
- How Much You Can Borrow Based on the Asset You’re Using for Collateral
Your asset will be valued below the value you think it should be. The bank will lend up to a certain percentage of the value of the asset.
- Enough Cash Flow to Pay Back the Loan
Your projections should also include your debt repayment plan. You’re likely to be asked to show available cash flow that’s 3 times more than your debt payment requirements.
- Can Your Business Grow Using the Funds?
You should put the borrowed amount into the parts of the business that will enable you to get more revenue over time and help you minimize your future borrowing needs.
- Do You Have a Good Business Credit Score?
Even if you have perfect personal credit and good assets, if cannot prove you’re paying your bills on time, the bank is likely to stand away from you.
- Is Everything OK with Your Personal Finances?
You are likely to be asked to show your “global financial statement,” including personal information such as outstanding student loans, personal credit card debt and mortgage payments. With a lot of personal debt and very little collateral, you should look for a strong co-signer.
- Do You Have All the Necessary Paperwork?
You’ll be asked to provide a lot of paperwork. Make sure to have all the necessary documentation in place before applying for a bank loan. Be fully prepared to look professional. You can also consider applying to an alternative loan provider like First American Merchant. FAM is a reputable business loan provider that offers exceptional business funding opportunities to merchants of any type and size. Your credit history is not a problem for FAM. You’ll be required to provide the minimum of paperwork.
- Find Out Whether the Loan Has a Prepayment Penalty
When applying for a loan, ask whether you’ll be free to pay it off early without any penalty.
- What’s Going to Happen With Your Loan When You Pass Away?
If you leave a large life insurance policy, the bank may come after that. Know the bank’s policy regarding this case beforehand so to be able to protect your family.
Getting approved for a bank loan isn’t easy. Be well prepared to answer the questions before applying for a bank loan. Consider turning to a reputable alternative lender like FAM to maximize your chances of getting approved for business funding.