Here are some key pointers to what you need in order to give your loan application the best chance for success and get approved first time.
Plan Ahead
1. Know How Much Money You Want and Be Specific with the Loan Purpose
Knowing exactly how much money you want to borrow and what it is for can be very important. If you can show the lender exactly what it is for, and how much you require (provide with written supporting documentation), they will not only see what their loan will be spent on, but that you are realistic about costs and serious about the investment.
2. Be Up to Date
Any bank or lender will look favourably on an applicant who has all their paperwork in order and payments up to date. This means ensure all financial statements and income tax is up-to-date and you can provide these for the last 2 financial years. Make sure that you have paid all your rates, taxes and obligations and that you can show your bank statements (ideally for a minimum of 6 months) without any defaults such as overdraws.
This will give you a strong footing from the word ‘go’.
3. Know The Value Of Your Assets & Collateral that can be used as Security
It doesn’t matter whether you want a lot or a little, what is important is to be truthful and to know how much your asset is worth. While it is good to list all your assets and income, it is never advisable to over exaggerate them.
List all your assets (the things you own), on one side of a piece of paper. These will include your home and any other property; investments such as shares; cash in the bank; what your business is worth; cars and trucks; and personal effects such as jewellery, furniture and other belongings (use the insured value if you’re not sure what they’re worth).
List all your liabilities (the things you owe), on the other side of the same paper. These will include your mortgage(s); car and truck loans; any personal loans and credit card debts.
After you have added both sides, calculate the difference between the 2 totals and this is what you’re worth.
4. Understand your Profit
The Profit figure a Lender will look at is different to the Taxable Income and even different again to the Profit figure in the financial statements.
Some Lenders may take your Profit from the financial statements (not from the tax return), and add-back interest; depreciation; amortisation and income tax.
It’s important to supply to your Lender the financials for the last 2 financial years. This will show a trend as to how things have performed in the past.
5. Check your Credit File
Being prepared avoids unpleasant surprises. Therefore it’s better for you to check your credit file from Veda Advantage (who holds your credit data) and see if there are any unfavourable marks against you or your business.
6. Have a Plan
A loan is easier to get when you can show that you have a clear idea of what you want to do, and you have it all written out in a logical manner.
7. Prepare a Profit & Loss and Cashflow Forecasts
It is important to have both of these to reflect your future plans. This prediction should be done monthly for the next 12 months into the future.
8. Internet Searches
Lenders use the Internet to carry out a search on applicants. Make sure you are aware of any adverse literature about you on the internet beforehand and make sure it can be explained.
This is the second article in a series on how to obtain the best finance for your business, investment or mortgage loan. Click to read part 1, or here for part 3.