Important Checklist for Business Owners Before Applying for Business Loan
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Are you looking to expand your business in a greater capacity? Are you seeking some additional funds for the prospects? If your answer is yes, you might have considered one of the most popular forms of business financing, i.e., applying for a business loan.

To successfully apply for a business loan, ensure you create a separate space to safely lodge all personal documents. Let us look at a small business loan checklist so that you can go about this process smoothly.

 

  1. Form Having Borrower’s General Information:
  2. The borrower information form requires the applicant to fill in the following details – the reason for the loan, business objects and principles, outstanding loans (if any), basic contact information, etc. The borrower submits this form to the lender upon completion of form filling.

     

  3. Financial Statements and Personal Information:
  4. Small businesses run by a general partner, proprietor or any partial owner requires sharing personal background details. When the lending party needs such detail, the objective is to get a fair idea about the credit score. Money being offered here can be utilised to either initiate or improve an existing business.

     

  5. Detailed Financial Statements of Business:
  6. The lenders usually have their own financial statement templates that the business seeking the loan needs to fill. It has complete details about incomes, expenses, detailed structure for management of funds, etc.

    Businesses with an already prepared balance sheet will find it easier to fill out this template, as it helps to classify and present a fair standing of the company distinctly.

     

  7. Certificate of Business or License:
    • C-corporation
    • S-corporation
    • Limited liability partnership
    • Sole proprietorship
  8. Any business is established and considered to be legitimate once the certificate of incorporation is issued. Legalities are different when the founding partner and business entity are considered separate.

    With time, additional licenses can be attained, but that would depend on the type of industry you work in and the state you operate from.

     

    Several options common for business registration are:

     

  9. Prior Loan History:
  10. Any institution which is in the lending business would need an understanding of borrowers past loan application records. They inquire about past applications made, whether the borrower makes timely payments and if there is any default in the record or not. This presents an idea of status and has a huge impact on the ability to secure new loans.

    The idea is to know whether the borrower would utilise the funds rightfully and is a good candidate for the loan.

     

  11. Submission of a Copy of Income Tax Returns:
  12. The income tax returns reflect correct information of financials, and it is mandatory for returns to be duly signed before submitting them to the lender for approval. Tax returns for about the last three to four years are required as a part of the business loan application process.

     

  13. Business Lease:
  14. Most businesses operate under a brick and mortar model. In such a case, it becomes mandatory that the small business submit the lease/rental agreement for the business loan process. Applying for a business loan is one of the most popular methods of business financing. Lenders scrutinise the lease agreement and its terms and conditions to conclude whether the rental agreement is fitting or not.

    However, if the business is completely operating online like an E-commerce company, sharing a copy of the rent agreement is not a mandatory requirement.

     

  15. Copy of Bank Statements:
  16. It is quite common for financial institutions/lenders to seek a company’s bank statements and personal bank statements at the time of application. It gives an idea of the regularity and sources of income as well as personal and professional spending habits. They analyse the trend of the past year’s bank statement with the current year to get an overview.

     

The above points should be kept in mind by small business owners while looking for business financing through a business loan. It is quite crucial to have the necessary documents in place before applying for a business loan, as it is only then that the applicant stands a good chance for a business loan being granted.

For more information on the subject and support, kindly log on to our website.

 

 

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.