How to Get a Commercial Loan: 5 Actionable Tips for Better Approval

Are you wondering how to get a commercial loan? What steps can you take? What information can help you get approved? Here are 9 tried-and-true tips to help!

According to recent data, the average loan size for small businesses in 2018 amounted to $371,000.

Whether your business needs more or less than that amount, the thought of applying for a commercial loan might fill you with doubt. You might wonder how you can get lenders to take you seriously. You may also have questions about what you can do if a bank rejects your loan application.

Another vital consideration is concerning the tax implications of small business loans. Depending on the structure of your loan, your small business may be able to qualify for additional tax relief based on current federal offerings and SBA tax relief programs. Tax attorney services can help guide you on any applicable forms for your business, programs that you may qualify for, and how to prepare the required information accurately.

Below you’ll find a list of five tips that’ll teach you how to get a commercial loan. If your business is currently tight on cash, this post will show you how you can secure the funds needed to take your company to the next level.

Let’s begin!

1. Get Clear on Why You Need the Loan

When you know why you need a loan, you can work out how much you need, thereby reducing the odds of 'over-borrowing.' This can help you limit your debt obligations, thus making loan repayments more manageable. 

Most people take out a commercial loan to start or expand a business.

If you’re taking out a loan to help you start a business, it’s critical you look at how you can keep your costs low.

For instance, you may feel as though you need to take out a loan to help you cover the costs of renting an office.

But you need to take a look at whether you need an office. If it’s something that’s a 'nice to have,' it’s probably not a good idea to use a loan to fund it. You should apply this kind of thinking to all other planned business expenses associated with the loan. 

If you want to expand your business, you might need the loan to help you buy equipment. To reduce your debt obligation, it helps to think about how you can spend as little as possible on the equipment you need.

This might mean you buy second-hand equipment from other business owners. It could also mean you 'lease' your equipment, thereby allowing you to make monthly payments instead of one large upfront payment.

2. Think About the Lender

Whether you like it or not, your loan application will only be approved if a lender thinks you’re worthy of the money.

Thus, you need to consider the kinds of questions a lender like Assets America will ask when considering an application like yours. If you can do this, you may be able to create a loan application that tackles all their objections.

One of the most pressing concerns a lender will have is whether you’ll be able to pay the money back.

If you’re using the loan to expand your business, and your business is currently profitable, you should mention this on your application. If your business is profitable, it’ll help convince lenders you have the capacity to pay back the loan.

A lender will also take an interest in your credit score. Thus, if there are any outstanding issues on your credit report, think about fixing them before speaking to a lender.

They’ll also take an interest in the assets owned by your company. This can include not only cash in the bank, bond and stock investments, but also the equipment associated with your business.

Consider appraising this equipment before speaking to the lender. If they can recoup a significant portion of the loan by selling these items, they may be more willing to lend you money. 

3. Save for a Deposit

If you can provide a deposit, you’re more likely to be accepted for a loan. Providing a deposit may also give you access to larger sums of money.

The amount of money you need to provide as a deposit will depend on the size of the loan.

Some lenders will stipulate that you need to provide a deposit based on a certain percentage of the total loan. For instance, they might suggest that you need to provide a 25% deposit. Thus, if you’re looking to take out a $100,000 loan, the deposit would amount to $25,000.

4. Speak to a Variety of Banks

If you’re unhappy with the interest rates provided by a bank, it’s worth speaking to other banks. In doing so, you may be able to find one that can give you the money you need, at more favourable interest rates. 

Of course, if you do things this way, don’t expect it to be easy.

Applying to several banks can be tedious and drawn out, and this can wear you down after a while. But if you’re adamant about getting a good deal, it’s something you’ll have to go through.

5. Should You Try Alternative Forms of Lending?

It’s worth noting you don’t have to rely on banks to supply you with business capital, as there are a number of alternatives you can use.

One such example is a 'peer to peer' lending company. These companies are specifically designed to help businesses raise capital. 

Because they specialize in lending to businesses, they may be more understanding of your circumstances. Following this, they may offer you a better lending agreement.

You can also approach an investor to help you secure the funds you need for your business. An investor will often be less scrutinizing than a bank, and this can be helpful if you’re a startup with little in the way of assets or trading history.

An experienced investor may also have a lot of business knowledge. As a result, they may be able to provide you with some guidance that could improve the growth of your business.

Do You Know How to Get a Commercial Loan?

After reading this post, you should now understand how to get a commercial loan that'll provide your business with the funds it needs. 

Securing funds for your business can be a stressful task, and lenders will put you through your paces before they offer you money. This can put a lot of pressure on you, and at times, you may want to give up. 

But if you can withstand all the questions and due diligence, you should eventually get the funds needed to propel your business to new heights. 

Want some extra advice on how you can fund your business using a loan? Check out this post for some helpful tips.