Being able to meet the monthly repayments on a commercial credit agreement and having assets to fall back on in the event that your cash flow should falter are important prerequisites for those who are considering applying for a business loan. However, of equal importance is the ability to prove to potential creditors that you are capable of meeting your obligations to them in the event that your application is approved. Lenders are regulated by governments and must meet their own obligations to remain in business so it is not unreasonable of them to expect their debtors to do the same and to require hard evidence that this is indeed, and will remain for the foreseeable future, the case.
Below is a list of paperwork that is commonly required by banks, building societies and other financial institutions around the world along with some notes on each set of documents.
1. Financial statements – basically a summary of your company accounts for the last couple of years, prepared, or at the very least audited by, a qualified accountant. These are required to demonstrate that your firm has the financial wherewithal to cope with the repayments for the amount that you wish to borrow.
2. Identification – as the representative of the company that wishes to borrow money, you will be required to identify yourself with an approved form of identification, such as a passport, driver’s licence or birth certificate. In some cases, it may be necessary to provide two separate forms of ID, at least one of which includes details of your home address.
3. Proof of purchase for any assets that are being used as security for the loan. If, for example, you are planning on using your commercial premises as security for a business loan, you will need to show the financial institute with which you are dealing the contract of sale that was drawn up when the buildings in question were purchased by your company.
These are the main documents that are required by lenders; additional requirements will depend on the exact nature of the loan, i.e. what you are intending to use the money for should your application be approved. If you wish to borrow money to erect a new building for instance, the following documentation will also be required:
• A copy of the plans for the proposed building – the bank or other institution that is considering lending your firm the money for a new construction will want to take a look at the plans to make sure that they are practical and that there are no glaring errors that could cause problems in the future.
• Quotations for the building work. You will obviously have already prepared a detailed budget for any major construction project for which you need to borrow money and this budget should be based on firm quotations, a copy of which your prospective creditors will be keen to see. Whether they are dealing with a personal loan application or a request for business finance, financial institutes always require documentation to support the calculations made by their borrowers, to protect their own interests.
It is entirely possible that the particular lender with which you deal will require documents that I have not mentioned in this article but the ones listed above are those that are most commonly requested. If you are in any doubt as to what exactly you will need to submit as supporting documentation when applying for a business loan, you should of course check with the lender in question to make sure that you are able to satisfy all of their needs and to avoid any unnecessary delays.
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