What Banks Look for in Small Business Loan Applications

It takes money to make money, but many entrepreneurs lack the capital to get their business off the ground. Many lenders offer solutions to give small business owners the funds they need to get started, operate, and expand. Not everyone will be approved for a small business loan, but understanding what banks look for when making their decision can help improve an applicant’s chance of approval.

The Game Plan

 Lenders want to be repaid, so they want in on the game plan, including exactly where the funds will go. Applicants should develop a detailed business plan that includes a description of the business and its leadership team, products and services, and short- and long-term goals, plus financial projections backed by a strategy for growth. Supplying the lender with as much information as possible may help build their confidence in granting the applicant a business loan. 

Creditworthiness 

Credit history doesn’t always make or break lending decisions, but most lenders will take the applicant’s creditworthiness into consideration. A solid credit history conveys that a business owner has maintained good relationships with other creditors. Other debt obligations will also be evaluated to assess the applicant’s ability to pay. Those with poor credit histories might consider paying down debt and raising their credit score before applying to improve their chances of 

approval. 

Collateral 

Lenders will also take an applicant’s collateral into consideration when evaluating their loan application. Collateral can be real estate, vehicles, equipment, inventory, accounts, or anything else of value the applicant is willing to lose should they be unable to repay the lender. If the applicant fails to repay the loan, the lender will have the right to seize any of these agreed-upon assets to recoup its losses.

Apply for a Loan Today 

This is not an exhaustive list of everything lenders consider when making a lending decision. However, establishing a game plan, building a solid credit history, and coming to the table with collateral can improve a business owner’s chances of securing a small business loan. If you’re considering starting a new business or expanding your existing one, apply for a loan with Liberty National Bank. As a small community bank with six locations in Central and Northwest Ohio, we take more than just a credit score into consideration. We may be able to help fund your small business and provide you with other business checking services. Call Liberty National Bank at 419-634-5015 or visit a branch near you to learn more.