Completing a commercial loan application package can require a lot of time and research in order to not make any mistakes. If your application is inaccurate or incomplete, the lender will have to contact you to get the correct information. When you are pressed for time, the delay in receiving your approval may be costly to your business if you end up being unable to purchase the asset you need, or pay your expenses before they become past due. Do not submit your application package to the lender until you are certain you have not made any mistakes.
Mistake #1: Failure to Provide a Business Plan
When you do not provide a detailed business plan, most lenders will not even consider your loan request. Your plan should include how the commercial loan you are applying for will help your business grow. Be sure to also outline your marketing and financial strategies, short and long term goals, and future expansion funding estimates.
If you already have an existing business plan, do not assume the information is enough to get your loan approved. The updated numbers may even be good enough to get you a better rate on your loan. Review the plan and update it as needed, to avoid making any mistakes that can cause your loan approval to be delayed.
Mistake #2: Not Specifying the Purpose of the Loan
You must provide the lender with a detailed list of how you will spend your loan proceeds. You cannot just say the reason for the loan is to buy equipment, you need to include the exact details of each piece of equipment and the related cost. You also need to explain how the equipment will benefit your company, if you have not already done so in your business plan.
If you are not specific as to the repayment terms you prefer, your lender may give you the loan they think is most affordable for your situation. If you decide the terms are not manageable, contact your lender and have them structure the loan the way you want, if they are able. Do not make the mistake of taking the loan offer from the lender, only to find out later that your revenue is not sufficient to cover the payments.
Mistake #3: Lack of Supporting Documentation
If you forgot to include your current financial statements, tax returns, or a purchase invoice from the seller, the lender will not be able to perform a loan review. Their decision to approve or deny your credit request is based on the information you give them, which makes it critical that you provide every document you think the lender will need to facilitate the application process.
Before you submit your application package, ask your lender to give you a checklist of all the supporting documentation they require to process the request. This will help you avoid making the mistake of omitting an item that is necessary for your loan to be approved.