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Small Commercial Loan - How To Obtain a Small Commercial Loan

business bank plan obtaining

Over the past few years, large amounts of bank failures, high default rates for commercial loans, and the overall credit crunch has made it quite difficult to obtain a small commercial loan. While getting a small commercial loan is more difficult than it was a few years ago, there are several ways an applicant could improve their chances of obtaining one of these loans.

The first tip in obtaining a small commercial loan is to develop a business plan that can be presented to the bank. A business plan is quite important because the bank will need to review the plan to determine whether or not they think that you could pay the loan back as agreed. The business plan will need to address what exactly the small commercial loan will be used for, how long it will be before you can start making payments, and when you think the loan could be repaid. A small commercial loan for an existing business will also require you to present a large amount of financial reports including operating statements, balance sheets, cash flow statements, and tax returns.

The second tip in obtaining a small commercial loan is to put forth plenty of personal equity. The more equity that you put into the deal, the more comfort a bank will have that they could recoup their capital in the event of default. For a commercial real estate deal, this may require you to put forth up to a 30% down payment and for a small business loan, you may need to put forth even more. Furthermore, you may need to place a personal guarantee on the loan that if your business or business plan fails, you will need to repay the loan out of pocket.

The third tip in obtaining a small commercial loan is to shop around with various lenders. For small business or commercial real estate lending, all lenders have different underwriting standards and lending strategies. Because of this, you could be denied financing from one bank, but obtain a very competitive rate from another. By shopping around with various lenders, you will help ensure that you get the best possible rate for the lowest cost.

The last tip in obtaining a small commercial loan is to establish a relationship with the bank prior to applying. Many commercial banks are enticed to offer a loan to an individual or company if the borrower is planning on opening accounts with the lender. If you are willing to open a business checking account with the bank, you could increase your chances of approval and could even obtain a loan with lower rates and fees.

Small Commercial Mortgage - Your Business Comes to Life with a Small Commercial Mortgage [next] [back] Small Business Startup Loans - How to Obtain a Small Business Startup Loan

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