Ask FundThrough: What Do I Need to Apply for a Business Loan?
FundThrough took to the streets to find out what’s required for a business to secure a bank loan in 2019. We also uncover when it might make more sense for a business to consider alternative financing options, like invoice factoring.
Suit up, get outside, and develop a relationship with your banker.
Although loan applications with most major banks can now be started online, developing key relationships is critical for operating a successful business.
It’s extremely important for you as a business owner to get to know your account manager and bank manager. Ensure that they recognize you and are familiar with your business by meeting with both at least once a month.
Cultivating these relationships early on will go a long way when it’s time to get a bank loan for your business.
Start preparing and gathering the required documents.
There are specific documents that banks require before they can begin qualifying you for a business loan.
First, they will need your business plan. If you’ve done one already, hooray! If not, get one done. You can either work on your business plan yourself or outsource it to a consultant.
If you decide to create a business plan yourself, there are excellent business plan creators that will speed up the process. This organization has a business plan writer that’s easy to use.
The second set of documents they will need to see are two years of financial statements. If the business is new, they will want to see sales projections, as well as your last two years of personal income tax.
The income tax statement is important because banks will want to see whether you owe back taxes. If you default on the loan, the Canada Revenue Agency will be able to make a claim on your assets before they can.
Banks will also want to verify personal assets and will accept bank statements, property tax/ownership, and investment statements no older than 90 days.
If you are a new business or if you are looking for a lot of capital, in addition to the above, banks want to see Articles of Incorporation, a minimum of two years of financial projections (detailed and monthly), offer of lease if applicable, and franchise agreement if applicable.
Choose the right bank for your business.
If your business has clients and customers in the Caribbean and South America, that will go a long way with Scotiabank, as they have a history of operations in those regions.
One of BMO Bank of Montreal’s strategic priorities is women in business. If you are a woman who owns a small business, you may want to consider them.
Finally, the BDC may not be top of mind for most business owners, but it’s a Canadian bank that focuses exclusively on entrepreneurs.
Consider alternatives that may be better suited to your business needs.
On average, the process of applying and getting approved for a bank loan can take anywhere from 60-90 days.
If you’re looking for a faster option and have outstanding receivables to leverage, you may want to explore an invoice financing solution like FundThrough.