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Key Requirements Start-Up Entrepreneurs Need meetTo Apply for Commercial Loans

author-img By Mashum Mollah 5 Mins Read July 18, 2019

Commercial Loans

You probably know that money is the lifeline of your start-up business, like any other entrepreneur. Generally, you resort to bootstrapping to commerce your commercial operations in the market. However, the amount you’re able to raise isn’t always enough to achieve your objectives. A time comes when you have to approach reliable institutions specializing in money lending services. You don’t have any other viable alternative. You could consider getting the cash you need by issuing equity shares to the public. However, taking this step means forgoing the full ownership and control of your concern. You won’t be in a position to take important decisions independently on any issue. In such a situation, you got to take the views of your investors into account. This significantly reduces your influence over your business.

What do you need to expect as an entrepreneur before approaching money-lending institutions?

You got to understand an important fact. Prominent institutions conducting money lending operations are always willing to help start-up entrepreneurs. These financiers won’t consider you to be an exception. However, each of these establishments has a stringent procedure which you need to go through. Only then can you expect to get the funds you need to operate your concern. You got to prepare the necessary paperwork to the satisfaction of the officials of these organizations. On top of this, you should be in a position to fulfill the following 5 important requirements:

1. Provide adequate collateral

This is one aspect which you can’t avoid. All credible money lending institutions are going to ask you to provide suitable collateral. This can be any of one of your business’ fixed assets. The officials of such establishments should consider it to be adequate for the amount they’re providing. After all, they are also operating a business in the market. These managers have got to ensure the money they are providing is secure from potential risks.

Such losses generally arise when you’re not in a position to clear your outstanding debts. In such a case, they’ll sell your collateral asset to recover this amount and interest charges. However, this is the worst-case scenario. There is one exception to this rule. This is when you apply for Small Business Administration Loan which American federal government provides.

2. Business plan

These financiers expect you to prepare and execute a proper business plan when conducting your activities. They’ll ask you to provide a copy of this scheme at the time of applying for assistance. You should be in a position to comply with this condition. The officials of such institutions will scrutinize this document thoroughly. Taking such a step is a necessity for them. By going through this paperwork, they get an insight into your business and commercial activities. They’ll come to know of your mission, vision, market operation, products, customers, supplier, and staff. This enables them to decide the growth potential of your business. They can then decide on whether it is worthwhile lending you the funds.

3. Scrutinizerelevant financial documents of your business

The officials of money lending institution are going to ask you to provide relevant financial documents. They expect a certified public accountant (CPA) to audit the paperwork before signing it thoroughly. Only then can these managers regard it to be authentic. This expert should have a good reputation in the market. It is one aspect they don’t compromise on. The professionals of credible establishments like libertylending say taking this step is essential of them.

They can’t classify your business in the same category as other going-concerns. You don’t have the same experience in the market as the owners of these businesses. However, they want to know your pre-operation costs until the day. Moreover, they’ll take a close look at your projected income statement and balance sheet. They may even ask for details regard your accounts receivables, investors, suppliers, account payables, and customers.

4. Details regarding your financial finances

When asking for assistance from prominent money lending institutions, your finances will come under scrutiny.  You got to provide details on all your assets and liabilities. These include documents relating to your house, car, mortgages, short-term loans, credit card particulars, and bank details. Moreover, you need to submit copies of your previous income-tax returns and social security number.

In some cases, these managers may even ask you to give a schedule of all your investment. This is necessary to assess your creditworthiness in the market. They need to be sure you’re in a position to repay the loan amount. Otherwise, they have other entrepreneurs knocking on their doors for assistance. They would rather cater to their needs.

5. Disclose insurance information

The officials of reliable money lending institutions go to any extend to minimize their potential risks. They keep this fact in mind when assisting start-up entrepreneurs. This is why these managers may ask you if you have any insurance policy. If so, they’ll want to know the details of the scheme, especially the section regarding payout. However, if you don’t, they may insist you take out one from a suitable service provider. Under this plan, the first nominee should be their establishment for obvious reasons. They can then use the funds to clear your outstanding debts in the event of your death.

Advantages of approaching money lending institutions

Approaching reliable money lending institutions can work wonders for you in the long-run. You’ll get the funds to operate your start-up business in the market without any hassle. The officials of these establishments do charge a nominal interest rate on the sum of money they provide. You’ll find this financial cost to be cheaper to other similar options. It won’t make a significant impact on your operating costs once you start commencing your activities. This is what you want at the end of the day.

Visiting creditable money lending institutions is a necessity for you. The advantages of taking this step, in fact, beyond any doubt. However, you need to fulfill the above 5 essential requirements of their loan application procedure. On top of this, you should depend on one establishment. There are many similar service providers in the market. You need to work with those who can cater to your specific needs. Only then can you get the results you’re looking for.

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Mashum Mollah

Mashum Mollah is an entrepreneur, founder and CEO at Viacon, a digital marketing agency that drive visibility, engagement, and proven results. He blogs at MashumMollah.com.

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