Wondering how to close your business loan faster? If you want your loan to move quickly through the approval process, start off by being organized, and having all the required paperwork in order.
When applying for a loan, it’s important to know you’ll need to provide to the lenders. Think of your loan application as a sales tool, just like your business brochures or ads. When everything is put together with the right combination of facts and figures, your application will sell itself. Your lender will be able to easily see the short- and long-term profit potential of lending money to your business. The application must convince your lender that you’ll pay back the loan as promised and that your managerial ability will result in a profit-making partnership.
Here are 11 tips at getting your loan application organized at the front end, in order to move your loan through the approval process faster.
Cover Sheet
The cover sheet of your loan is the title page to your application. It should include your name, business name, address, date and your business phone number.
Cover Letter
The cover letter is a personal business letter to your business banker requesting consideration of your application; this can range from a small business line of credit or a loan for commercial property. The second paragraph should describe your business product or service provided. The third paragraph is best kept to just one or two sentences that “sell” your application by indicating what your future plans are for your business.
Table of Contents
This page makes it easier for your business banker to see that all the documents are included, and is an aid to moving the loan processing along to a faster conclusion.
Requested Loan Amount
Include the requested amount and use of the loan for business property or business property loan. This page documents how much you want to borrow and how you’ll use the loan. For example, a business equipment loan is to be used to buy a new piece of equipment. It should show the contract price—then add the cost of freight and installation, and subtract the amount you’ll contribute. That should reveal the remaining balance of what you want to borrow.
History and Description of Your Business
This section is often the most difficult to write. The key is to stay with the facts and assume the reader knows nothing about your business. Describe—more fully than in the cover letter—the legal form of your business and its location. Tell why you believe the business is going to succeed. Conclude with a paragraph on your future plans.
Management Team
Business bankers know that it’s people who make things happen. Your management team might consist of every employee if they oversee an important part of your operation, or it might be just you and one key person. In one or two pages, list each person’s name and responsibilities. Where appropriate, describe the background that makes this person the right choice for that job.
Market Information
You should begin these pages with a complete description of your product line or service, and the customer market it’s targeting. Next, describe the success of how you’ve previously targeted your market niche. Finally, detail your future plans to add new products or services.
Financial History
Most bankers want to see balance sheets and profit and loss statements. As a startup, you will need to use projections. Bankers will compare these to norms in your industry.
Financial Projections
Financial projections are a set of three documents—a projected income statement, balance sheet, and cash-flow statement. They should show how the business will generate sufficient profits to pay off the loan. Your accountant can help you prepare these documents.
List Available Collateral
Typical collateral can include cash reserves, stocks and bonds, equipment, home equity, inventory, and receivables. They all demonstrate your understanding of how your banker will look for a backup repayment source. Each piece of collateral listed should be described with its cost and current fair market value. You might need to provide documentation of value, so be prepared to get appraisals or get your paperwork in order.
Personal Financial Statements
As a startup, you’ll need to add your personal guarantee to any loan the bank makes. The banker will want to see your tax returns and balance sheets showing personal net worth. Most banks have preprinted forms that make pulling these figures together relatively easy.
It’s important to be organized and get the information needed to your business banker to process your business loan quickly and efficiently.
To get assistance in this process, talk to one of our business bankers at Chelsea State Bank and let them help you make the application process easier and faster.
