Decoding The Documents Required To Get A Commercial Business Loan
Are you planning to apply for a small business loan? Make sure you gather the documentation you’ll need before you start preparing your business loan application. The good news is that most lenders offering commercial business loans require the same kind of information. Of course, every lender will ask you to fill out an application form and submit a photograph. Keeping your records up-to-date is a must if you plan to get a small business loan.
Here’s a short list of essential documents you need to submit, along with your business loan application:
There are exceptions, but usually a business plan will be on the list of requirements for a commercial business loan application. Therefore, before you apply for a small business loan, you should prepare one of these. Nowadays a proposal can be short, but lenders still want an updated, professionally prepared summary of your business, its vision, financial projections, and tangible profit-and-sale strategies that have worked in the past. You should use this opportunity to present your financial goals, such as future sales, income, profits and cash flow, and qualitative business goals.
Lenders may want to determine whether the people responsible for running a business have the business acumen to successfully convert a loan into profit. This is especially true when you want a commercial business loan to start a new business. As evidence of management or business experience, make sure you provide the resumes of you (as business owner) and other members of management like co-owners and executive officers. Take time to groom the resumes and make sure every resume you submit is detailed and well prepared. Your overall goal is to convince a lender that your business is well managed.
When evaluating your business loan application, a lender will expect to see your company’s latest financials. The purpose behind this is to confirm that your business has enough cash to maintain operations and repay your commercial business loan. This is where your business’s bank statements help. Not only do they provide proof of your business revenue, but also offer a lender some insight into how responsibly you manage the cash flow. Lenders calculate your average bank balance based on the bank statements. While most lenders may ask for two years of your business’s bank statements, some such as Bajaj Finserv, look closely at statements only for the last three months.
Also Read : All You Need to Know About Business Loans
A balance sheet is one of the most essential financial documents you are required to submit with your business loan application. Typically a financial snapshot of your company, a balance sheet enables a lender to verify the claims you’re making about your business’ financial position. Your balance sheet shows a lender how your business functions, in addition to your assets, liabilities and equity. In other words, it lets your lender know how financially sound your business is. A lender will analyse your latest balance sheet pretty closely, so make sure you present it promptly and in a decipherable format.
Profit and Loss Statement
If your balance sheet shows lenders what your business’s assets and liabilities are, your P&L statement tells them how your business used them. It essentially gives them a picture of how profitable your company was during a specific fiscal period. Before approving your commercial business loan, the lender needs to be reasonably certain that your business’ cash flow is steady and strong enough to keep you afloat and allow you to repay the loan on time and in full. Typically, lenders will want to see P&L statements from the previous two years to track your business income.
Income Tax Returns
Income tax returns provide a lot of important information that allow lenders to accurately determine your company’s credit profile. This assessment holds sway when a lender wants to be reasonably certain that you’ll be able to pay back the commercial business loan. Tax returns are especially important for a business loan application when your business is young and small, and you are finding it difficult to prove to a lender that you’ll see long-term success.
Now that you’ve gone through the possible documents required for business loan application, it’s time to find a commercial business loan that’s suitable for your company. Contact Bajaj Finserv for best deals on small business financing up to Rs. 30 lakh.