Most business owners would agree that they are dependent on business loan lenders to help them achieve their business objectives. Business loan lenders give business owners cash based on the value of the assets and profits of the business. This can be considered as a form of credit, as it is repaid with interest. But business loan lenders also require certain minimum standards before they consider approving a business loan application from an applicant. The standards that business loan lenders usually review before granting business loans are mentioned below.
First, business owners should have a sound credit history. They should have not missed any payments on their business loans for the past two years or more. Owners should also have a reasonable expectation regarding repayment of the loans. This means that business owners should be able to predict their revenue and expenditures for at least the next three to five years.
Second, business loan lenders look at business plans. This means that business owners have to prepare financial documents such as the balance sheet, income statement, and business plan. These documents will allow business owners to show why they need money from investors and why they expect the business loan they are getting from business loan lenders to be repaid in a short period of time.
Third, business loan lenders prefer to see business plans that include some tangible assets of the business as collateral. This shows that the business owners have something to secure the loan with if their business fails. Collateral is usually offered by the business owners' personal assets.
Fourth, business owners should submit their financial information to business loan lenders. They have to submit business licenses, financial statements, and other business-related information. This information is required to evaluate business owners' ability to repay the business loan they are getting. Aside from this, business loan lenders may also require business owners to submit copies of their credit reports and current mortgage rates. This will help them get an accurate assessment of the current market value of their business.
Fifth, business loan lenders do not want to risk their own money. Therefore, they will only provide business loans to companies that have a good chance of repaying it. To determine this, business loan lenders will ask for a business plan or operating agreement from the business owners. They have to provide these things so they will know if the business is worth of investment.