Specific loan requirements vary lender by lender. However, there are a few typical loan requirements that you can expect to meet in order to secure a loan. The underlying principle behind lender loan requirements is to ensure that the borrowers are not too high a risk. These requirements may seem onerous but you must understand them to better your chances of securing a loan. Here follows __ typical loan requirements:
1. Good Credit
If you desire a loan to start-up your business, banks will scrutinize your personal credit. If you already have a business, both your personal and business credit will be scrutinized. While less than ideal credit may not ultimately prevent you from securing a loan, good credit will make an undeniable argument for your reliability as a borrower.
2. A Solid Business Plan
Tired of hearing about the need for business plans? The truth is that business plans can only help you if well executed. Lenders not only want to know that you have a history of paying your debts, but they also want to know you have a sure vision of how you're going to be paying back the loan. Knowing both what the loan will be used to purchase and how those purchases will turn to profits can increase your chances of securing a loan.
While potentially the most painful requirement, collateral may be a necessary evil to secure a loan. Collateral, such as real estate, homes and other valuable items, give lenders an extra sense of security knowing that if you fail to pay back, or default on, your loan, they have a way of making back the money that they originally lent you. When you default on a loan, lenders have the right to seize the collateral placed on the loan, and then sell it to make back their money.
4. Industry Savvy
This requirement may seem like an impossible barrier if you are starting up, but recruiting advisers with experience in the industry you wish to enter can help you meet this lender requirement. Perhaps industry savvy is just another way of meeting the business plan requirement, but lenders want to know that you know your industry. Industry knowledge and experience enhance your credibility as a potential loan recipient. Don't be afraid to find an adviser if you lack the experience that lenders want to see.
While the list could go on, the aforementioned requirements are typical for nearly every loan, whether from a bank or government source. Being prepared with a solid business plan, potential collateral and business savvy, you are well on your way to securing a loan, especially if you already have good credit.