Business Loan Requirements

Obtaining a loan can be a stressful task for entrepreneurs, considering the lengthy business loan requirements established by lenders. A business loan approval basically depends on how a business owner or borrower introduces the business (existing or startup) with respect to a prospective lender’s business loan requirements.[br]

Obtaining a loan can be a stressful task for entrepreneurs, considering the lengthy business loan requirements established by lenders. A business loan approval basically depends on how a business owner or borrower introduces the business (existing or startup) with respect to a prospective lender’s business loan requirements.[br]

Business Loan Requirements: Important Documents

The strength and accuracy of a business’s financial statements comprise the basis of making an informed, lending decision. Important financial statements required by most lenders are:

 

Business Financial Statements

·        Balance sheets of past 3-5 fiscal years.

·        Income statements or proof of business profits/losses for the past three years.

·        Accounts receivable and payables, ideally categorized into 30, 60, 90 and over-90 day categories.

 

Additionally, a business owner must present a statement of cash flow projections, which indicate an estimate of future earnings and explain how it will be used towards business loan repayment.

 

Personal Financial Statements

This includes statements of partners, owners, partners and stockholders, who own over 20 percent of the business. Personal financial statements must list out the relevant stakeholders’:

·        Personal assets

·        Net liabilities

·        Monthly payments

 

Additionally, the lenders may ask for the personal tax returns of the stakeholders’ for the last three years.

 

General SBA Business Loan Requirements[br]

To qualify for a US Small Business Association loan program, a business must meet the following basic business loan requirements:

 

·        It must have failed to qualify for a business loan through standard bank, financial institution or private lender.

·        The business owner is willing to submit a guaranty, for personal and business.

·        It has reasonable owner equity.

·        It is a profit-oriented business that operates in the US.

·        The owner is willing to repay the loan within the predetermined maturity period. This period is typically between 5 and 25 years, depending on the cash need of the business and the assets being financed.

 

Additionally, a business has to meet certain specific business loan requirements under an SBA Loan Program. These requirements typically cater to the size, operating locations, type of business, use of proceeds, use of other funds and business loan repayment.

 

Finally, some business loan requirements involve pledging collateral or injecting equity (making a down payment). However, such requirements are generally intended for high amount, long-term loans or high risk borrowers.