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Going through commercial bank for your next loan may be the best way to get the funding you need for your business or project. You will be much more likely to be approved for a loan if you know what the process will require.
Build Up Your Credit
Before you start looking for a loan, you should check out your credit score. No matter what your purpose for the funding, a commercial bank will only consider your loan if you have good credit, especially when you have little collateral to offer. If your credit is less than perfect, you can begin to improve it by making all payments on time, lowering the balances on your credit cards, and only opening new credit accounts when truly necessary. It may take six months to a year to see a significant increase in your score, but a rosier credit history will always make the application process easier.
Shop the Competition
It is important to shop around among commercial bank lenders to understand your options and compare loan rates and terms. In a prosperous economy you will have plenty of room to negotiate rates and have lenders compete for your business, but even in a down market it is to your advantage to research all the offerings to be sure you are getting the best possible deal. When you are simply concerned with getting approved however, the best plane may be to apply with one of your current banks since you already have a familiarity and a standing relationship with the company.
Collect the Documents
After you begin the application process, the bank will give you a list of required documents. Most of them are standard from lender to lender, so you can speed up the loan application process by collecting them ahead of time. These documents typically include:
- Recent bank statements
- Tax returns from the past two years or more, both personal and business
- W-2 pay stubs for the past several months, if applicable
- Proof of other income sources
When you meet with a loan officer, you should present all the evidence that will convince him that you can responsibly repay the lender's funds. This means having a concise plan laid out, including the purpose of your loan, the estimated costs for your purchase or investment, and any other relevant personal or business background.
If you are applying specifically for a business loan, you will need to furnish the bank with your business plan, a year-to-date business profit and loss statement, projections on future cash flow, as well as financial ratios and a proposed business budget.
After you provide all the necessary documentation, plead your case, and complete the application, you can expect to wait anywhere from 2 to 6 weeks before you receive an approval or denial. If you are denied, keep repeating the process with other commercial bank lenders until you find the funding you are seeking.
