While applying for a business loan application, you need to know what you will require giving as well as what lenders are seeking. Nearly every lender requires similar details through an application form. You should convince them that you will repay the loan as promised, and this is how it results in a profitable connection also.
In each business loan application, you must incorporate 12 specific things. The necessity of every item varies with your industry, your business’ size, and the fund amount you are applying. Let’s have a look at every item:
Business Loan Application
1. Financial projections
It’s a set of 3 documents – a balance
sheet, projected income statement, and cash flow statement. It must showcase
how your business, using the loan, will produce ample profits to repay the
loan. Your bookkeeper can make these documents ready.
2. Cover letter
It is a personal business letter which
addressed to the manager of the lending firm, i.e., Indifi for discussing your
loan application. Through this letter, you can request the lender to approve
your application and offer you recommendations on the same. The cover letter
must showcase your business’ description in detail.
3. Amount and utilization of the loan
This part documents the amount you need to
borrow and its way of use. For example, if you are purchasing equipment, it
must display its cost, installation cost, cut down the amount you will pay, and
display the remaining amount to take.
4. Business credit report
You must add this thing in your application
if your business is not new. A good business credit report is a dominant factor
to get loan approval.
5. Market details
One must give the complete description of
your service or products, and the market it is ruling. Describe how you have
aimed your market niche and whether you have been successful or not. Lastly,
provide your future strategies for adding new services or products.
6. Bank statements
Before approving your loan application,
lenders will monitor your financial state to have an idea about your business’
performance. They also need to confirm whether you can afford to repay the
loan. It is why bank statements are everyday business loan needs.
Specifying your available guarantees –
equipment, cash stocks, inventory, bonds and stocks, home equity, and
receivables – showcase your understanding that your lender will seek a backup source
of repayment. Every piece of collateral must describe with its price and new
fair market value. You might require giving records of value to be ready to get
your documentation or appraisals in order.
8. Management team
Lenders understand that business entirely
relies on people who work for it alongside the business owner. These people
incorporate the technical, operations, and management team. The performance of
all employees is equally essential; maximum lenders ponder only these teams. It
also may include an outside consultant.
9. Table of contents
This part helps your lender see that every
document is incorporated.
10. Income Tax Returns
Business loans need applicants to submit
their business and personal ITRs for the past three years.
11. Financial history
Maximum lenders ask for profit and loss
statements and balance sheets. Your start-up will require using projections.
Lenders will compare them to norms in your industry.
12. Legal documents
Relying on your business loan needs, lenders
like Indifi may need you to submit some legal documents which incorporate:
Contract copies if you have a third party
Your business’ registration details
Articles of Incorporation
Franchise contracts if any
So, these are 12 essential parts to be added to your business loan application. The application must be authentic with all relevant details alongside the supporting documents. To increase the scopes of loan application approval, make sure to include the parts above in your application, so the lenders like Indifi feel confident regarding your business and approve the request.