6 Tips for Successfully Applying for a Business Loan(2)

For SBA loans, applicant companies only need to complete an assessment and survey once, and the most profitable industries can apply. If you operate a small independent family business, the term of the SBA loan is 25 years, not 3 to 5 years.

Although the cost of settling SBA loans is higher than that of ordinary bank loans, the advantage is that the federal government offers loan guarantees, which encourages more banks to make such loans and to take risks.

Another advantage of the SBA loan is that if your business becomes profitable after 5 years of operation, you do not need to pay a fine for an early repayment.

Depending on the loan structure, the SBA loan amount ranges from US $ 100,000 to US $ 20 million. These loans are very beneficial for small businesses and their owners.

In addition, the business owner must occupy 51% of the space in the building for business operations to be eligible to apply for the SBA Loan, which means that the building cannot be of a nature. investment.

4. Characteristics of traditional bank loans

One point that business owners can ignore is that traditional bank loans have a higher down payment, usually 20% to 50% of the total loan amount, depending on the industry.

Loans for the purchase of hotels and other unstable assets, such as shopping malls or multi-building malls, generally require a down payment of 40% to 50%. This number may discourage some business owners and investors. There was once a client who owned a small business and wanted to buy an apartment but did not understand the down payment requirements for commercial real estate. In fact, many business owners do not realize that when they buy a commercial property, they not only need sufficient cash, but also a large number of stable, paid tenants and efficient short-term tenants to obtain commercial loans. "

5. Written documents are key       

Although many business owners have financial statements issued by certified public accountants (CPA), parts of the states' tax avoidance can affect the likelihood of loan application approval.

In order to save some taxes, many companies make a lot of fuss in their financial statements. "

If the business owner does not accurately report all of their cash flow and income, the possibility of obtaining loan approval will decrease. Banks generally want a business's revenue to expense ratio to reach 1.2.

When the company's financial statements are deducted from too many expenses, the company's income and expense ratio may be less than 1.2, which may be legal for the IRS, but the risk is too high for banks.

Banks require businesses to submit three-year tax returns to ensure the business’s income meets the minimum loan request threshold.

Another aspect of the bank review is accounts receivable. If 20% or more of a business’s sales are from the same customer, the business’s revenue is likely to decline significantly.

Banks like businesses to have a diverse customer portfolio, including national brands.

6. Timing is key

When a business is profitable, business owners should start planning their loan application, carefully consider current business planning and development strategies to increase income, and don't wait for income or l 'business shrink before applying for a loan.

When the business is in good shape, management can begin to prepare for a decline in cash flow and apply for a line of credit. Businesses mainly learn to plan ahead, because when the business loses cash, the bank no longer approves the loan.