Preparation could lead to loan approval for small businesses

Preparation could lead to loan approval for small businesses

| Jun 6, 2018 | Business Law |

Small business owners in Ohio likely know that they will face considerable scrutiny when approaching a bank or credit union for a small business loan. Preparing essential documents prior to meeting with loan officers could aid business people who need financing. Lenders will want to see financial records from at least the prior three years, a business plan and projections about future revenue and expenses.

A business owner should have copies of business and personal tax returns ready to give a lender. These records allow lenders to evaluate the loan applicant’s financial health and recent business performance. A business plan needs to accompany the financial paperwork. An established business might not have a formal written plan, but the owner could prepare a narrative that describes the goals of the business and its plan for growth. A startup business will need a formal business plan that describes the expected sources of revenue.

Additionally, lenders will want to study financial projections. This documentation should present realistic figures and explain the assumptions underlying the sources of income. Business owners should be ready to answer questions about their credit history and explain how they have solved past problems. These preparations could enable someone to communicate their credit worthiness to potential lenders.

Whether pursuing financing from a public institution or private investor, a person might want legal advice before signing off on a loan. A business law attorney may provide insights about the liabilities imposed on the person by the terms of the loan. If creating a private agreement with an individual investor, an attorney may be able to draft the document and strive to include language that protects the person’s interests.