Commercial loans are required for most business projects and this can either be for either a leased commercial business or for a brand new building.
Preparing before you see a commercial lender can save a lot of wasted time and effort as you want to ensure you have a good working relationship with your lender.
Commercial lenders will want to know specific information about your business plan and the purpose of your business so both parties can learn to appreciate the expectations and requirements for both the borrower and the lender respectively.
Establish Your Financing Requirements
The first step is make contact with the lender you’ve selected beforehand. It’s best not to jump into the loan application process immediately as you want to first establish a rapport with the lender to clearly understand their requirements. This is the first step in establishing a relationship with the lender which is vital part of the process.
You should have clear ideas of your objectives for your business so you can clearly outline a concise business plan and what you have determined that you will need for financing.
It’s best to perform as much research as you can on your commercial lender so you have an idea of what they are looking for when it comes to commercial lending. Every lender has their criteria and they can vary considerably from each other.
The initial visit with a lender will help clearly establish what documentation you will have to accrue before you make a formal application for your commercial loan.
Presenting Your Commercial Loan Application
Almost any loan will consist of financing for both your short term needs and for what might be required for long term financing.
Breaking down the loan into specifics such as hiring an architect or designer, construction requirements, insurance, staffing equipment, inventory, etc. should all be researched and spelled out before you make your application.
It is also vital that you have performed applicable marketing research and that you can show that your business plan is viable such as presenting the lender with evidence of current contract, clientele and how your business will fill a particular need or niche.
The purpose of this information is show how you will ultimately be able to repay the loan, and other contingency plan you have in place to ensure ongoing payment.
Your Credit Rating is Important
Every lender wants assurance that you are credit worthy. And every lender will closely scrutinize your character, your credit rating (both commercially and personally), along with knowing how much operating capital your will be bringing to the table, and available collateral to secure the loan.
Documentation for Commercial Lenders
You will likely have to provide the following documentation for a commercial loan which includes:
- Income balance
- Cash flow statement,
- Your credit report
- Copies of your income tax statements,
- Personal finance statement,
- Your marketing plan
- Business plan,
- A breakdown of the loan dispersal
It is also vital that all of this information should be presented in a professional appearing format and should be both detailed and concise.
