As a company owner, you need to know that there are a lot of things a bank will look into before it approves of giving you a loan for your company. It isn’t just a matter of applying and getting a loan from Northcash. As a businessman, you need to realize that no bank will fund your business plan. In their defense, they will say that it was against banking law. Below are some ten things you should expect your bank you ask you if your applying for a loan for your company.
No bank will lend you huge sums of money if there is no way that they can guarantee they will get the money back. Here is where collateral comes in; your business will have to pledge in some of your hard assets to back up that business loan that you’re applying for. If you own a small business, the bank may require you to pledge your personal assets like house equity to get that business loan you need.
- Business plan
Most banks will require you to avail your business plan document for the loan you’re applying for. The banker will want to have a look at the standard summary of your company, the market, the product, financials, and even the team.
- All the business’s financial details
When the bank asks for all the company’s financial details, it is looking for everything; this includes all the past and current loans and debts that your company has incurred, all the investment accounts, bank accounts, and credit card accounts. You will also need to provide all the supporting information for these records like tax ID numbers and addresses.
- All details on accounts receivable
These will include account-by-account information, aging, and also the payment and sales history. Have these records available.
- All details on accounts payable
Here, the bank will want to see your credit references. Like the companies you do business with and the records of the business transactions. These will vouch for the payment behavior of your company.
- Financial statements of your company audited and reviewed
In your financial statement, you have to include all your business assets, capital, and liabilities. It is preferable that you avail the latest balance sheet for your company. Preferably, one that has been audited and reviewed. Banks will, however, be more interested in the assets that you will pledge on loan.
- Your personal financial details
These include your social security number, your assets, and liabilities, your net worth details, your investment accounts, mortgages, auto loans, credit card accounts, etc. In other words, everything that touches on your finances.
- Insurance information
Most banks will require your business to take out some or all insurance of one or more of the company founder at the point of their deaths. This way, the bank secures some of the loan by ensuring a direct payout to the bank at the point of death to pay off the loan.
- Copies of all the past returns
This will help prevent multiple having multiple sets of books. Banks, however, are interested in looking at your corporate tax returns.
- Future ratio agreements
Some commercial loans include loan covenants. With these covenants, the company will agree to keep a certain amount of the key ratios which are the current ratio, quick ratio, and, debt to equity. If by chance the company’s finances fall below any of the agreed ratios then the loan will be technically in default.