As a small business owner, one of your top responsibilities is running a business successfully, and staying true to your goals. However, to achieve that, you’ll need to know how to operate with finances! This sometimes means asking lenders for a loan for your business.
Whether you’re a beginner or an experienced manager, taking into consideration possible questions a lender can ask will surely help you obtain that loan faster. So, check out the most common questions lenders ask.
1. What is your business plan?
Even though this doesn’t seem particularly relevant, many banks and lenders would like to know more about your business plan. For commercial types of loans, having a business plan ready, even if it’s the short one, can make the whole process easier and faster.
2. How much money do you need?
Obviously, a lender would like to know how much money do you need for your business. No matter how simple this question seems, it can be quite difficult to answer. To create a better impression of your company, show your lender that you’ve planned your needed finances down to the last cent!
3. How will you use the money?
As money is a crucial asset that runs the world, it won’t be quite easy to obtain it. That’s why lenders need to know how will you use the money.
For instance, if you need a new computer lab, you need to be able to explain why a computer lab is vital for your business. This indirectly tells lenders you have a solid plan and that you’ll be able to pay the money back. Make sure to use terms such as expansion and growth, as that’s exactly what they need to hear.
4. What is your business credit score?
This is one of the deal-breaker questions. Whether or not you’ll receive a loan depends on your credit score. Some lenders may ask for your personal as well as for your business credit scores, so make sure to check your business credit scores before you even apply.
If both are solid, a lender will simply move on. However, if they spot any irregularities, they may ask you about them.
5. How will you repay the loan?
Even though this question may feel a bit violating, loan lenders need to know whether you have a plan for every situation. It doesn’t matter if your small business is currently in the growth phase, ups and downs are natural. So, lenders need assurance your business will be able to survive through them and still have enough assets and money to repay the loan.
6. How quickly do you need the funds?
In some cases, applying for a loan is a process that may take up to a couple of weeks, especially if you’re applying for a larger sum of money. By answering this question, you’re revealing the urgency, which in certain situations can be a red flag for lenders.
7. Can you provide businesses financial details?
Besides the business plan, credit scores and other necessary information, some lenders may ask to see your business financial details. These may include any debts, annual turnover, rates and other financial aspects of your company.
8. Are you currently repaying any loan?
Why would they ask you this? In case you’re currently repaying a loan, this may mean that you’re asking for additional funds to repay that loan, which may be a sign for lenders to back off. You’ll also need to provide proof that you’re currently not under debt or repaying a loan. Even though not every lender will ask you this, you need to be ready for this type of question and have proof available.
9. When can you repay the loan?
Many lenders need to know when will you be able to repay the loan. That’s why they set fixed terms that may vary from a couple of months to a couple of years. However, not everyone is willing to provide you with the flexibility you need.
Therefore, consider getting flexible commercial business loans in Australia. Simply apply online and receive the needed funds in two to three business days.
10. Can you put up collateral?
In case you didn’t know, collateral is an asset, such as inventory or premises, you pledge as a confirmation you’ll repay your loan. If you can’t make a repayment, a bank or a lender takes your collateral. That’s why applying for a loan online is a better choice.
You don’t need to put up collateral, but in most cases, you need to provide a personal guarantee you’ll repay the loan, which holds you, personally, accountable if you don’t.
These are the 10 most common questions lenders will ask you before you obtain a loan. To give off an impression of a professional company and reliable individual, prepare some answers to these. That will ease the process and extensive background check many lenders and banks conduct.