Most businesses would have to borrow money at some point in their life cycle and while there are various ways to take a loan for your business, a common way to obtain one is to make a request at your bank. If you are considering taking a bank loan, you need to know what is expected and how to go about it.
Knowing the exact amount you need is the first step to starting your loan journey as it will play a role in whether you get your request approved. For example, you need a hundred thousand dollars for your business. How would you borrow this money from your bank?
Ask your bank if they can give you this amount
The type of bank you use will determine the amount you can borrow from it.
A small bank may not have the capacity to lend you a hundred thousand dollars for your business, so before any other thing, confirm first if yours can loan you that sum comfortably for the duration you’ll need it and be able to pay back.
Know your credit score
If you want to borrow a hundred thousand dollars from the bank, you have to ensure your credit score is high enough to get you that amount.
This is the sum total of your credit history, the number of accounts you have open, your levels of debt and your repayment history, as well as other factors.
Your repayment history makes up 35% of your score, while your current loans—which is calculated in proportion to how much credit you have available—make up 30%. The length of your credit history, as well as the type of accounts you have, make up 15% and 10% respectively, and finally, your recent credit activity completes it with 10%.
State clearly the reason for your loan request
To obtain a hundred-thousand-dollar bank loan, you have to state clearly the reason why you need that amount of money in the first place. Do you want it for salaries? Or you want to scale your business by increasing production?
Banks will usually have different loans for businesses, and your reason will determine if they have a facility for what you need and if what they have can give you the exact amount you want.
Get the necessary documents together
Once you have confirmed your bank’s ability to give you the loan you need, you have to start putting the necessary documents together.
This will depend on the type of loan you will get, among other factors. If it is an unsecured loan, which in essence is not backed by collateral, you may not need to include proof of collateral. If you are getting a secured loan, you would need to have it.
Generally, regardless of the loan amount or type you want, you’ll be submitting the following documentation:
- Proof of identification;
- Proof of income or the financial statement of your business;
- Proof of collateral;
- Federal income tax returns.
A business plan that states why you need the loan, how it will be dispensed, and the plan you have to repay it
Getting a loan from the bank can be a tedious but necessary affair. If you are looking to ease the process of borrowing a hundred thousand dollars from your bank, you should follow the steps above.