Putting Together a Business Loan Package
Knowing how to apply for a loan can increase your odds of success.
Putting together a proper loan application package can improve your chances of obtaining a loan so you can take advantage of opportunities to grow your business. Here's how to help make the process go as smoothly as possible.
1. Know your purpose
Before you request financing, determine why you need financial assistance in the first place. "My team and I often hear business owners come in and say 'I need a line of credit.' However, a line of credit might not be what they need," explains Arnie Campbell, Regional Sales Manager at Union Bank. "Business owners and bankers alike need to know the purpose of the loan and how it will benefit the business."
2. Get financial documents in order
"Having your finances updated and organized makes it easier to gather all the necessary financial documents you need for your loan application," says Christy Schmitt, head of Union Bank's Small Business Banking. Be sure you can provide year-to-date financial reports in addition to your most recent completed tax returns. Review any questions you may have about your financials with your CPA or CFO, so you can answer any questions your banker may have on the loan application.
3. Communicate with your banker
Having an in-depth conversation with your business banker on the front end can help him or her understand the nature of your business, your strengths and weaknesses and how to mitigate those weaknesses. "Businesses that don't have a relationship with their bankers are doing themselves a tremendous disservice," Campbell says. "Part of Union Bank's goal is to be proactive and talk to business owners, learn more about their business, what their objectives are and how we as a bank can help them and give them ideas and solutions to help improve efficiency, production and cash flow."
Ultimately, the credit decision comes down to the quality of your financial information and the performance of your business. "The relationship with the banker simply helps in terms of guidance," Campbell says. "Your Union Bank business banker is using their expertise to help you look out for your business."
4. Prepare your application
The more financial documentation – and details – you provide in your loan package, the more information your banker has to understand your business. Bankers look for financial trends, so include the following with your application:
- Three years of business and personal tax returns
- Year-end and interim balance sheets and income statements
- Supporting documents such as debt schedules, accounts receivables aging and accounts payable aging
- Liquidity statements
"When reviewing these documents, we are looking for a primary repayment source," Campbell says. "Does the company have the cash flow to support the requested debt payments?"
5. Define your business plan
Your business plan helps the bank understand your business – the industry you're in, what you sell, your customer base and how you compare to your peers. "It's important to have a business plan and to carefully think out where you'll be in two to three years," Schmitt says.
6. Be open
When meeting with your banker, Schmitt and Campbell both say to be open about your business and finances. Don't withhold any information. The documentation helps the bank understand how your business operates. "It's important for bankers to have a clear and complete understanding of the business's operations in order to make good recommendations and accurate credit decisions," Campbell says.
Submitting a complete and accurate loan package and being prepared to speak candidly and completely with your Union Bank business banker can reduce the number of questions your banker may have and the time it takes to process your loan request.
For more information on small business financing, talk to your Union Bank business banker about our business loan options.
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- Discover what underwriters care about when evaluating your application.