How to Prepare for a Business Loan Application

  July, 2017  

Whether you are a startup or a well-established business looking to expand, there are pertinent steps you should take as a business owner before approaching a financial institution for funding. Your efforts will significantly impact the lender’s perception of your organization and will allow them to get a better picture of your business and its financial needs. Before applying for a business loan, make sure to:

Determine the amount of money you need.
Before seeking financial help, take the time to really analyze your business’ financial stance. What will the capital be used for? What is the state of the industry your business is in? Is it seasonal? What other debt do you have? Are you just starting out or is your business expanding? Who else is invested in your company? How urgent do you need financial funding? Knowing the answers to these questions will not only help you determine the amount of money your business is going to need, but will prepare you for when your lender asks these fundamental questions.

Understand your numbers.
Lenders consider the 5 C’s of credit when a borrow applies for a business loan – character of the business owner(s), capacity (cash flow), capital, collateral and conditions within the industry and economy. This information is used by the lender to measure the financial stability of your organization and understand your business’ ability to successfully pay back the loan. Lenders will also be looking at the debt-to-worth ratio. This is the amount being asked to borrow compared to the equity investment the business owners have put into their own business. Strong equity shows the owners are fully committed and also ensures that the business can operate effectively, when combined with the borrowed capital.

Be prepared for an online review.
Business lenders will do their homework. They will review your company’s website, social media accounts and online reviews to ensure that they are professional and positive. Do an online review to ensure your company’s online presence accurately portrays your organization. Review your personal Facebook, LinkedIn, Twitter and Instagram accounts as well to make sure your image will not be damaged by what you have shared with your online network.

Create a professional business package.
Before submitting an application, put together the following pieces so that your lender will have the necessary information to complete a business loan application:

  • Comprehensive business plan
  • Resume for each business owner
  • Balance sheet, cash flow, income statement, and bank statements
  • Financial projections
  • Tax documents over the past three years for each of the owners and the business
  • Business certificate or license
  • Articles of Incorporation or Formation, as applicable
  • List of executive officers and their backgrounds

Research lenders.
Meet with financial institutions to determine which type will be the best fit for your business. There is an overwhelming amount of choices when it comes to selecting an institution including: community banks, credit unions, commercial banks, and online financial institutions. Know what each financial institution has to offer your business. Consider banks with a local connection that know the market, know the region’s strengths, and are vested in the local economy. Be sure to also get to know the lender you will be working with. A good commercial lender will learn about your business or industry and will be able to guide you through fundamental questions such as when to add capital, when to grow, and when to add capacity against demands.

By understanding what lenders will review and analyze, you will increase your chance for a smooth loan application process. Business loans are available to help your business grow, conduct new research, fund marketing efforts, hire new employees, expand into new territories, and much more. No matter the reason, lenders want to help you achieve success. They are available and willing to be a resource as you look to grow your organization.


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This article is for informational purposes only and is general in nature. It’s provided for educational purposes only. The information contained herein may not be applicable to every situation or jurisdiction, and we encourage you to consult with your professional advisor prior to acting on information contained herein for advice applicable to your specific situation. Camden National Bank makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.