How to build strong loan application?
Planning to borrow funds from traditional bank or micro-financing institution? During the initial credit application stage your loan officer collects necessary information to obtain approval on your case.
The standard package of documents is different depending on the type of credit you planning to take. Each lender has its own risk estimation system, but there are some general requirements that lenders find most significant while analysing your credit application.
Positive credit report
In most cases, you will need to prove your financial responsibility to get approval. Lenders will study your credit report and calculate credit score to estimate whether you are a risk-worthy borrower.
They want to see that you have the ability to manage your finances over a tangible time period. How to keep your credit report clean? Simple. Make sure you pay all your bills timely and maintain positive banking account balance. The collected information will be checked and verified thatās why it is not recommended to lie.
Track your costs and income
Being accountable and clear in your goals, spendings and profits is crucial when you deal with borrowing credit funds for your business. Lenders are looking for clarity about the purpose of borrowing to estimate risks and offer the most suitable debt repayment strategy regarding your particular case. Prepare to provide your credit officer with detailed information on your budget plan.
If you need a business loan, credit officers will examine equity owned by your firm and the level of financial commitment. The more personal funds you invested in your business the more attractive borrower you are in the eyes of a lender.
Loan officers will also examine the macroeconomic context, general trends in your companyās field, and previous borrowings. Prepare to demonstrate corporate assets, including inventory, equipment and accounts receivable ā they can be considered as a secondary collateral.
Clear long-term strategy
Create a clear long-term plan to gain maximal benefits from your borrowing and formulate several scenarios of debt repayment: pessimistic, conservative and optimistic. Make sure you can afford all three.