Loan Applications – What Your Bank Will Look For

1. Loan Applications – What Your Bank Will Look For Banks differ regarding the products they offer and their review processes. It is important when applying for any type of commercial loan that you understand the documentation, requirements and processes involved in loan applications by your chosen bank. Whether you're looking for a cash requirement loan, equipment loan, real estate loan or any other type of commercial loan, there are five main factors the bank will focus on when deciding whether or not to approve your loan application. The considerations of a loan application include credit history, cash flow, business projections, collateral available to secure the loan and your personal character. The documentation required includes personal and business bank statements, income tax returns, business plans, profit and loss statements and more. Your business credit history will be reviewed, unless you are a start-up, in which case both your personal and pervious business credit history will be viewed. It's recommended to review your credit report in advance and identify your credit score. You can use this to your benefit, improving your score if necessary before you apply to increase your chances of approval. Focus on your business credit history to ensure that your business also has a stellar credit report. Lenders usually require at least four trade experiences listed on your report. In the event you haven't opened any trade accounts and made use of credit facilities, now is the time to do so. This can help your business to build up its credit history to succeed in the long run. In some instances, you may be able to get the loan you need through collateral which provides protection for the bank. In the event you don't repay the debt, they can seize the collateral and sell it to repay the loan. It’s important you get a good understanding of your collateral options to ensure you minimize your own risks. One form of collateral can be inventory, for example, which can be used to secure a short-term financial solution. It's essential you protect your collateral. Bear in mind that real estate and personal property are public record and the creditor will have a claim against the collateral should you default on the loan. For a start-up business, the equity value of real estate is used as collateral, for example. Lenders reduce their risk by discounting the value of the collateral, ensuring it doesn't exceed the market value in any way. Banks lend based on a loan to value ratio. A good example of this would be an unimproved property providing a much lower ratio than a building in excellent condition. Other considerations include whether the real estate is occupied or not. Other collateral options include inventory that can yield an advance of up to eighty percent of the value. Accounts receivable and new equipment can yield a loan of seventy-five percent of value. It's essential to have a good cash flow when it comes to applying for a cash requirement loan. Your cash flow should come from operating your business. Before approaching a lender for a cash requirement loan, you will want to get a good understanding of your cash flow and cycle.

2. The main concern for any lender is whether you generate enough money to repay the loan on time. Ensure you focus on improving your cash flow by paying off debt, collecting receivables, reducing credit allowances, increasing revenue and reducing inventory. About Us: CalPrivate Bank, formerly San Diego Private Bank, is a leading private bank serving clients throughout Southern California in the United States. This very well-established bank services high net worth individuals and businesses of all sizes. CalPrivate Bank's focus is to provide a Distinctly Different Banking Experience through unparalleled service and creative funding solutions for individuals and businesses with complex financial needs. They offer a wide array of financial services, including checking, savings, time deposit accounts, treasury management and related tools. To find out more, visit https://calprivate.bank/