The business loan process
Applying for a business loan can be intimidating to borrowers new to the process, however, the loan application process is fairly straightforward. Although the specific steps can vary from lender to lender and business to business, most business and commercial financing will follow a similar process.
Business owners will have a much easier time navigating the business loan application process when they know what to expect and are armed with the right information and documentation. An MFAA Approved Finance Broker can help.
Step 1: Speak with an MFAA Accredited Finance Broker
Having a one-on-one discussion with an expert can help borrowers to quickly identify eligibility for the types of business loans, leases or line of credit products available to suit the unique needs of their business.
Finance brokers can also recommend a specific lender based on the funding scenario and help the borrower estimate how long it will take to obtain funding, an important requirement, especially if time is critical.
Step 2: Apply for the loan or lease
Your Finance broker will help you with loan or lease application and verification documentation including a business profile.
In general, the business profile should include: the type of business, the company's annual sales, the total number of employees, a profit and loss statement, information regarding the length of time the company has been in business and details about recent ownership history.
A lender will usually want to see a business plan, particularly for a start-up company.
Lenders would also require personal financial statements and available business financial statements.
If the loan is secured, the borrower will also need to provide information about the collateral being offered. Collateral can include personal real estate, property, business equipment, accounts receivable, inventory and supplies, or business real estate.
Step 3: Wait for the lender to assess documentation
The lender will then verify the authenticity of documents and review the applicant's credit file, credit rating and background as well as the financial history of the business. Your finance broker will update you as and when necessary.
Step 4: Receive loan approval or otherwise
After assessing the application, if approved, the borrower and lender will sign all necessary paperwork, then the funds are disbursed or the loan settles (if for a property purchase).
How long does it take to get business loan or lease approval?
The length of time to approve a business loan varies depending on the chosen lender and the business' unique circumstances.
Approval can be completed within a matter of days or can take several months, usually depending on the complexity of the transaction. A finance broker can help borrowers estimate the length of time to get loan approval at the outset of the application process.
What types of business loan and lease financing are available?
Although specific financing offers will vary, most lenders offer a variety of financing options for business owners. Below are a few of the most common financing options:
- start up financing;
- business growth financing;
- debtor / inventory financing;
- motor vehicle financing;
- equipment and plant/tools financing;
- business property financing; and
- trade financing.
How much can my business borrow?
Borrowers with a good credit rating, offering good security and supporting their application with good background and financial history or projections will have a good chance of success with their application.
How long will I have to repay?
Generally, business loans are set for a term of one to fifteen years, however, this can vary from lender to lender. The amount of money being borrowed will also affect the term of the loan. A business loan with residential property security can have a term as long as thirty years with some lenders. A loan can also be structured on an interest only basis, but be cautious as the principal will still be owed at the maturity of the loan.