A company must meet a number of serious requirements to obtain a business loan. Since we are talking about fairly large sums, you should understand that banks just try to minimize the risk of loan default. Here is the list of six classic small-business loan requirements:
- The company must be commercial.
- The borrower’s business must exist for at least six months to obtain a loan. Of course, each bank has its own deadlines, but it is considered that this period may be enough to assess the prospects for further business development objectively.
- The company must have a stable income.
- In most cases, the borrower must have a good credit history of the company. It is unacceptable to have a bad credit history, debts to the tax authorities, judicial and arbitration claims, protested bills. Otherwise, you will have to look for a micro-lending company.
- The company should not be at the stage of bankruptcy.
- The borrowing company is obliged to provide guarantees of repayment of loan funds. One of the convincing evidence of the client’s solvency is the possibility of providing collateral or attracting a guarantor who can share responsibility for the return of the loan.
There are also additional requirements for individual entrepreneurs: the age of the borrower should not be less than 21 years at the time of receiving the loan and not more than 65 years at the time of repayment. If the age of the borrower is more than 60 years old, then a surety agreement is concluded with his direct heirs.
Loan conditions in different banks and for different credit products may vary significantly. Standard terms for business lending are as follows:
- The maximum and minimum amount of the approved loan depends on the financial and economic condition of the borrower and the type of lending. For example, the maximum overdraft amount is from 30 to 50% of the monthly turnover on the account. For other loans, the maximum amount depends on the indicators of financial and economic activities of the company.
- Loan rates depend on the type of loan product chosen. Today, for legal entities, on average, rates range from 10 to 20% per annum. For express loans, the rates are significantly about 25–35%.
- The terms of lending to legal entities are usually 3-5 years. Overdraft is issued for a period of not more than one year with the continuous use of funds for up to 30 days. Refinancing is possible for up to 120 months or more.
All the bank requirements may seem strict, however, they are quite reasonable. If you cannot meet all of these six conditions, do not give up and apply for your small-business loan. Every application is considered separately, you can be the lucky one.