A commercial loan is a type of loan given from a financial institution to businesses to support a garden variety of operational, manufacturing, payroll, and similar costs. Since, funding options such as a bond, equity, and others require a lot of documentation, regulatory hurdles, and steep upfront payments, most SMEs and startups look at commercial loans as a hassle-free choice
If you are applying for a commercial loan
in Dallas, Texas for your startup or small business, read on to find
out the 5 top requirements you’d need to fulfill to be able to secure the loan.
1.
Your Credit Worthiness
First and foremost, your credit score will be your biggest
advocate. If you have got a good and healthy credit score, any lender will be
more than happy to move on to the next steps to help you secure a loan. Keep in
mind though, that lenders will not only look at your credit score but your
business’ as well.
So, keep both scores in order when you are applying for a
commercial loan.
2.
Revenue & Profits
As a standard practice to acquire a commercial loan, you’d
need to show your annual revenue reports and profit and loss statements to
apply for the loan. Lenders review these documents to gauge a business’ ability
to repay the loan. These documents help set up the terms of the loan, the
timelines, and may help the lender see your future receivables as a form of
collateral.
3.
Collateral
When applying for the commercial loan in Dallas, Texas,
you need to show the proof of collateral that you’re putting up for the loan.
Different things can be used as collateral to secure the loan for your company.
A real estate property, business equipment, inventory, vehicles, and anything
else that has monetary value that the lender will be able to sell if you
default on the loan can be considered collateral.
As mentioned in the point above, account receivables – especially
when substantial – are an attractive collateral option.
4.
Use of Loan
Not all, but most lenders require potential borrowers to
outline where the loan amount will be utilized. Most commercial loan types are
there to improve a certain sector of the economy. For example, there are
agriculture loans that you cannot use to support your fashion retail business.
Therefore, be open and clear about what you intend to do with the loan amount
and where you want to utilize it. Some lenders are not strict about these
conditions, though. So, do your research well and ask important questions.
5.
Business Plan
What always goes in favor of a borrower is a solid business
plan. If you are launching your startup and want a commercial loan to cover
operational costs for the first few months, a detailed and well-executed
business plan will help a potential lender see your loan request more
favorably. For those who have been in the business for some time, a similarly
well-done loan proposal might do the trick.
Always keep your business plan/loan proposal, specific,
concise, and comprehensive. The more answers it has, the fewer questions your
lenders will have in their minds.
Concluding
Applying for government grants and other funding options can
be time-consuming and too much for a new business. For business expenses that
are time-sensitive such as payroll or fulfilling a large manufacturing order,
commercial loans work as the best lending product. They are flexible,
easier-to-get, and completely secure.
