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Are you looking to take out a business loan? There are many times where a business might need to raise capital whether this is to manage during a challenging period, to replace equipment or to grow the business in one way or another. Business loans can be a great solution to your financing needs, but you will want to make sure that you qualify before applying so that you do not experience any setbacks.
So, what are a few of the main qualifying factors when taking out a business loan?
Documentation
As you might expect, you will need to provide a range of legal and financial documentation in order to qualify for a business loan. Typically, this will include tax returns, balance sheets, personal and bank statements, commercial leases, business licenses and other documents.
Credit Score & Annual Revenue
As with a personal loan, it is also important that you have a good credit score to show that you are a responsible borrower. This is why it is a smart idea to check your credit score in advance of making an application and take steps to improve this if necessary. On top of this, most lenders have a minimum annual revenue, so you should always research this beforehand. Many also stipulate that you must have been in business for at least 2 years.
Business Plan
Having a strong business plan in place is important for getting approved for a loan if you are starting or growing the business. This will include key information such as company and product/service descriptions, management team, industry analysis and financial projections.
Check Lender Requirements
Every lender is different when it comes to business loans, which is why you should always shop around and research each lender. It is important to make sure that you qualify for the loan before applying otherwise this could set back your plans as well as negatively impact your credit score.
Collateral
If you are applying for a secured loan, you will need to have some kind of asset that you can secure against the loan. This could include property, equipment or stock that the lender could take if you default on the loan. This can be a risk, which is why many prefer to opt for unsecured business loans as a way to raise capital (this may require a personal guarantee).
If you are looking to take out a business loan for any purpose then these are a few of the key requirements that you will need to consider. It is always worthwhile checking each lender requirements as they can vary, but you will always need to get organized and ensure that you are in a good position to borrow in order to qualify.
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