5 Things Commercial Loan Lenders Look For

When commercial loan lenders review a credit application package, it is important they have as much detail as possible about your business and the purpose of your loan request. You must provide the lender with a current business plan, and up to date financial records. Your credit history must be sound, and the collateral on the loan needs to be within the lender’s guidelines. The amount of the loan and the terms of repayment can have an impact on the interest rate you receive for your loan. If you take the time to give your lender all of the information they need, you should have a fast decision on your application.

Business Plan

If you already have a business plan, review it to update any new information. You should have a marketing plan included, and an explanation of how you intend to use the new loan for your business. The more detail you put into the plan the easier it will be for the lender to understand your goals.

Financial Records

Gather your latest financial records to give to your lender. Include an income statement, balance sheet, cash flow statement and retained earnings statement. Make sure the records are all up to date, so the lender can make a decision without having to delay the application process.

Credit History

Your credit history can make the difference between getting an approval or a denial of credit. If the lender sees that you make your payments on time regardless of the ebb and flow of your business cycle, they will know you are a creditworthy borrower.

If you are having credit issues, it is wise to write down the specific reasons for your problems and how you intend to resolve them. Give the written statement to your lender, and explain it in detail to help them understand why your credit is not up to par.

Loan Collateral

If the purpose of your loan request is to purchase equipment or property, you must have a sufficient down payment in order to meet the lender’s loan-to-value requirements. If you do not know what the lender needs you to put down on the loan, find out before you apply. The amount may put too great a strain on your capital to make the purchase worthwhile.

Loan Structure

Determine the kind of loan structure you want so that the payment does not effect your operation. You may have to accept whatever structure the lender offers if there are any irregularities with your loan request. For example, the lender may determine the loan needs a balloon in order to lower the payment amount enough to be covered by your income.

If the loan terms are not agreeable, consider other lenders before you accept a structure that you do not want. You can also apply at several lenders at the same time, in order to avoid any costly delays that could arise from having to repeat the application process if you refuse the original lender’s terms.