Running a business can be costly. From operational costs to purchasing equipment, real estate, or inventory, among others, there are a lot of expenses involved. It is, therefore, common for owners to source funding for their businesses. Accessing a commercial loan is, however, not that simple. Certain requirements must be met. To qualify for a commercial loan, the following are some of the things that you should consider.

1. Borrowing Information

Why does your business require the funding? This should be the first thing you consider when seeking out a commercial loan. Referred to as the ‘borrowing cause,’ this is information that the lender will need. You should be able to clearly and comprehensively present your reason and the duration you require the loan. This is the first step in qualifying for a loan.

2. Collateral

For a secured loan, you will need to declare collateral. Lenders use this to cushion themselves against defaulted payments. Anything valuable you own can be classified as collateral. This can be property, vehicles, and savings, among others.

If you are applying for a commercial real estate loan, the property to be funded by the loan can act as collateral. Also, 51% of the building should be occupied by your business. Otherwise, it will be considered a rental property which will require you to apply for a different type of loan.

While collateral is common in commercial loans, it is not always a requirement, mostly depending on your credit score.

3. Business Credit

Your ability to qualify for a commercial loan will also depend on your business credit score. Your score will also determine the amount that you can access as well as the terms of the loan, i.e., interest rate, payback period, down payment requirements.

You can get your business credit score from a credit-reporting agency. The lender may also perform their own credit check. The better the score, the higher your chances are of getting approved. This will also grant you favorable interest rates and little to no down payment.

4. Business Information

Your eligibility for a commercial loan does not only lie in your business credit score. Other factors concerning your business are also relevant to the loan process. This helps the lenders to gauge whether your business is stable enough to repay the loan.

One of the things they will check is the duration which you have in business. The longer this period is, the more confidence they have in your business.

Your business financial information will also be scrutinized. Among the things they will look at are your cash flow, tax returns, and current debts.

5. Personal Financial Information

Commercial loans are for businesses. Still, your personal financial information will have an impact on the loan process. The same applies to your partners if any. Lenders will take a look at your financial history for any issues that may give them doubts.

They will also check your personal credit score. If low, it could affect your chances of qualifying for a commercial loan.

Conclusion

A commercial loan can serve a business in various ways. Your ability to qualify for one can make or break your business. By putting the above factors into consideration, you will be in a better position to secure funding for your businesses.