Bank Loan Application Process: Documentation Overload?
When your business needs money to cover large purchases and/or expansion costs, a traditional bank loan is normally an owners first choice.
Banks can typically provide the necessary funds at the lowest rates. This may be the best option for your business if your circumstances are ideal, however ARF Financial offers business financing backed by its several Community Bank partners giving you the features you want without the hassle and paperwork overload you don’t!
When applying at your local bank, you can make the rather cumbersome application process smoother by already having these documents gathered and accessible when discussing your needs with a bank loan officer.
1. Business Plan
A solid business plan shows the bank what your company is all about, how well it’s operating and why you’re applying for a loan. It should include an executive summary, a market analysis, a detailed business description, the qualifications of the team you employ and information on your marketing strategies.
2. Credit Reports
The bank wants to know that you and your business have a solid credit history. This demonstrates that you know how to handle debt without borrowing or spending too much, and that you routinely make payments on time.
Minimum credit scores vary, and if you can’t prove that you’ll be consistent paying back a loan, the bank will be much less inclined to extend funds to you.
3. Financial Statements
Financial projections are often included in a business plan, but some banks require them to indicate your business’s future performance.
You must be able to provide profit and loss statements, cash flow, a balance sheet and important financial projections based on past performance. The bank could request monthly, quarterly or yearly statements depending on how long you’ve been in operation. Most banks have a minimum threshold for time in business. It varies from bank to bank but 1 to 3 years is typical depending on your business type but could go up if you need a larger sum of money.
4. Bank Statements
Personal and business bank statements serve as proof that your financial situation is what your business plan and financial paperwork says it is. Banks usually require one year’s worth of these statements when you apply for a loan.
5. Income Tax Returns
It’s always prudent to hold onto your yearly tax information in case you need them to apply for a bank loan. Banks like to see tax statements over a period of several years. Providing your personal and business returns help verify your income, overhead and to support the validity of other financial documents involved in your loan application.
6. Proof of Collateral
Collateral is anything that you or your business owns that can be put up to guarantee the amount of the loan you’re requesting. This may include your personal home or vehicle, business buildings and properties, mechanical equipment or big-ticket inventory.
Any of these items may be seized by the bank if you fail to make your loan payments on time, but showing solid collateral is a sign that you’re doing well enough to prevent this from happening.
7. Legal Documents
While the bank isn’t likely to doubt the legality of your business, you still need to prove that your operation is legitimate. Be prepared to show your license and registration, articles of incorporation, any contracts with suppliers, property leases and franchising information, if applicable.
If all of the paperwork is in order and the bank determines that your business is eligible for a loan, the application should go through. Once approved, you can use the money to cover the expenses detailed to the bank in your documentation. If you have all the required paperwork, collateral and credit history, the entire process can still take a couple of weeks. However, if you’re missing documents, or have less than stellar credit, the approval timeline can increase dramatically – even months – worst case, be prepared for a decline letter.
There is an Easier Option.
If you don’t have time or the ability to gather up all of these documents and wait for the bank to review and approve your business loan application, you might consider taking out a Working Capital Loan or Business Line of Credit with an alternative lender like ARF Financial.
When you obtain business financing through ARF Financial you don’t have to sacrifice the bank features you’re looking for like:
- Fixed terms up to 36 months (3 years)
- Minimal paperwork (no tax returns, business plan or financials)
- Approvals in as little as 48 hours
- Fundings in a matter of days
- Access to a credit line with 5 separate drafts to use for 4 months
- No collateral required on amounts up to $725,000
Additionally, if you’ve only been operating for 1 month and/or you’re credit is less than perfect, you can still be quickly approved through ARF Financial as long as your business is generating revenue of $100,000 per year or more ($8,500/mo.).
One of the best parts of obtaining a business loan through ARF Financial is that there is much less paperwork required so you can stay focused on your running your company – not searching for documents!
Ready to get started? Begin your application online today and receive a FREE, no obligation quote! Or if you have additional questions, click here to send us an email. We’ll work hard to get you the funds you need without the hassle you don’t!