Know The Formula That Banks Use For Your Approval
Due to the recent collapse, raising money for a business has become a task for insiders only. Although the government supported the banks with a lot of money, many banks became less generous. Today, being able to get a loan is, more than anything, knowing the approval process. If you clearly know the requirements that a bank takes into account to approve a commercial loan, and make sure you have the requirements ready before applying.
Banks today generally use a formula to approve or deny loans. Unfortunately, in the United States, once you apply for a business loan, it is illegal for a bank to tell you how to qualify. It can only approve or deny you. He is strictly prohibited from giving you information on how to get approved. This is known as a “commercial capital conflict of interest”.
Fortunately, although a bank cannot give you guidelines on how to qualify, a business expert who knows these guidelines can. There are many of these experts who clearly know how to increase your chances of approval for a business loan. (For example, former employees of banks and financial institutions or business advisors.)
I have participated in many of these loans with many different banks and I know very well the general approval formula. Below I share this 3-step formula and the requirements that validate it.
- Amount and Approach of Loan Sought: In other words, how much money do you need and for what? To determine how much you qualify for, you must know your monthly free earnings.
- Payment Capacity: answer this, based on your monthly income, could you make the payment of the loan you request? If the answer is yes. You are on the right track.
- Proof of Income and Collateral: do you have documented proof that corroborates your monthly income? Do you have any collateral or guarantee available? Such as property, equipment, machinery, inventory, or other. (It doesn’t matter that you still owe it).
Necessary Documentation. In order to validate the approval formula, it is important that you have certain documents that corroborate the veracity of what you request. This is the documentation:
- Business and personal taxes for 2-3 years
- List of business and personal debts
- List of personal and business operating expenses
- List of business and personal assets or guarantees
Your personal credit report is also necessary, but today it is no longer as important as it was a few years ago. It is known that there are millions of damaged loans in the United States and therefore the banks are being a bit flexible and take into account the crisis and personal situations that were out of control.
This formula can work for you especially if you are looking to buy or refinance a property, if you need capital for expansion and operation. Be prepared and use this information to your advantage. “In asking is giving.”
No more for now, until next time. And remember there is nothing like being your own boss!