So, you have decided to apply for a commercial loan to expand your business. Now begins the application process, but do you know what paperwork you will need to provide for the application?
The paperwork needed depends on what type of loan you are applying for, secured or unsecured.
A secured loan is a loan that is back up on the value of some collateral. This collateral could be either a vehicle, real estate, equipment, or anything else with verifiable value. With these loans you typically can borrow a percent of the collateral being put up for the loan. The limit is set at the collateral value because if for some reason you are unable to pay back your loan the bank may repossess your collateral and sell it to recover the loss. These loans can be easier to acquire than an unsecured loan because they have less risk.
An unsecured loan is a loan that is not backed up by an asset. Instead, the loan amount is assessed on the value of the cash flow and profits from your company over a specified amount of time. The bank will use this information along with the time frame of the loan to determine how much you might qualify for. These loans take a bit longer to process and require more paperwork to confirm the information needed.
Below is some standard paperwork you might be required to provide when applying for a commercial loan:
- 2-3 years of personal tax returns
- 2-3 years of business tax returns
- Your financial reports, records, and books
- Details on any collateral
- Equipment Collateral information
- Real-Estate Collateral information
- Vehicle Collateral information
- Personal Credit Score
- Business Credit Score
- Documentation on what the loan will be used for
- Business Plan
To determine exactly what paperwork you will need, it is best to reach out to a financial professional to assist you. Applications can require different paperwork depending on the situation and what type of loan you are applying for.
While not all these documents might be needed for your loan application it does not hurt to have them ready just in case.
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