Whether you are starting a new business or have a business that is already established and in need of additional financing for new equipment or something else, obtaining a business loan can be the perfect solution. However, wanting a business loan and actually getting the loan can be two different things entirely. If you are considering a business loan and want to increase your chances of success in obtaining one, here is what you should talk over with your CPA as you begin your journey.
Ask Yourself Some Questions
When meeting with your CPA about taking on a business loan, always begin by asking yourself some important questions. First, why do you want the loan? Is it to buy new equipment, expand your business, or perhaps provide cash flow to pay off existing debts? Next, are you able to take on a business loan? Remember that once a lender gives you the money, it's not a gift. Instead, the lender will actually expect you to pay back the loan. Finally, have you considered all possible financing options? Before getting a business loan, always compare multiple lenders and discuss their pros and cons with your CPA.
Gather Your Information
Once you have asked yourself a few questions and have given answers that satisfy both you and your CPA, the two of you should then begin gathering the necessary information that will be needed for the loan application. This will include both personal and business information. Personal information will often include your full legal name and address, a credit report, criminal record, a personal statement, and related financial documents. Business information typically includes articles of incorporation and organization, share certificates, and Schedule Cs.
Organize Your Financial Statements
This step is where your CPA will really earn their money and put their expertise to great use. If you apply for a business loan and don't have your financial statements well-organized, you have virtually no chance of being approved. When getting financial statements together, remember most lenders will require balance sheets, bank statements, tax returns, accounts receivables, and multiple profit-loss statements.
Should your business own or rent property, you will also need to include information associated with this, such as rent/real estate schedule, tax payments and monthly payments, and documentation pertaining to ownership percentage.
While you and your CPA are organizing your financial statements, don't forget to take a close look at your business credit score. If it is less than 600, you may have difficulty gaining approval for a loan. Should you manage to be approved, a low score such as this will likely mean higher interest rates and repayment terms that may not be to your liking.
Outline Your Debt
As you know, most lenders hate to give out loans to applicants who already have large amounts of outstanding debt. Should you as a business owner happen to have outstanding debt, this does not necessarily mean you won't get a loan. Instead, you and your CPA will just need to carefully outline your debt. To do so, a business debt schedule will be needed, showing your current outstanding debt, credit amounts, and monthly payments. If a lender sees you are committed to repaying your debts, they may approve your loan application.
Complete Your Loan Application
Once you have all your information organized, it's actually time to complete your loan application. Depending on the lender you select, you may do this online or be required to submit a file that's filled with paperwork. If you need to submit actual paperwork, organize it so that the lender can easily find what they need.
Regardless of how you apply for your loan, your CPA will strongly emphasize that it is critical you be completely honest on your application, especially about your debts and any past businesses you may have owned. If there is one thing that will quickly kill a business loan application, it is a lender catching you in a lie. Once it is determined you have submitted false information, your application will almost always be rejected.
If you have completed the application on your own, don't submit it until your CPA has been given sufficient time to review it for any mistakes. Once you and your CPA are satisfied, cross your fingers and submit your application to the lender.
Be Prepared to Wait for an Answer
Unfortunately, there is no standard time regarding how long it will take to learn if your business loan application has been approved. If you use an online lender, you may learn your fate in as little as 24 hours. However, it is not unusual for some online as well as brick-and-mortar lenders to take up to six weeks before making a decision.
Like many loan applicants, your lender may ask that you submit additional information before they make their decision. If so, don't assume this is a bad sign. If you do get approved for a loan, don't automatically take it. Instead, let your CPA look over the loan agreement and its terms before you sign on the dotted line.
If for any reason your loan application is denied, don't be afraid to ask the lender for feedback as to why it happened. Whether it was a low credit score, too much debt, or other issues, knowing why your application was rejected can help you the next time you apply. Should you be in desperate need for financing, you may be able to get a loan through the Small Business Administration. Often able to help business owners who can't gain financing from traditional lenders, discuss this option with your CPA if necessary.
Since gaining a business loan may mean the difference between your business growing stronger in the years ahead or possibly shutting its doors for good, do all you can to get your application approved by a lender. By working closely with your CPA as you gather information and complete your application, you increase the odds of getting the money you need for your business.