Are you clear about the documentation you need when processing a business loan ?
If you don't have it, then we are going to show you some of the things you need to know before requesting any business financing.
If you do not have the correct documentation, it would not be the best idea to try to process it, as the image before the financial company will not be the best.
We have said it before, when a company wants to get a loan here, the image is important.
Not just the physical image but the professional image before the entity.
That entrepreneur will always be better valued when when he borrows money he does it having everything documented than that other one who when he asks for a loan is not only not clear about what he needs but also does not have it documented.
Documentation required by financial companies in business loans
In business financing entities always ask for a series of documentation.
Now, we are talking about banks, not companies that offer loans between individuals because they work differently.
It is the banks of a lifetime that in the end end up mostly making loans for SMEs and businesses.
What documentation do they ask for?
In the case of SMEs that are operational and in operation, what they ask for is always the documentation that reflects the progress of the business.
We speak as it could not be otherwise of the quarterly models presented in the treasury (model 303 of VAT, model 200 of corporation tax…)
In Spain they are these models but in other countries they will ask you for the corresponding documents.
This is the first documentation that any bank will ask you for.
Apart from this, the banks will do is also request the annual accounts to verify that this information coincides with that presented in the treasury.
There are companies (banks know this) that present the annual accounts with different numbers from those presented in the quarterly models.
That is why the banks no longer ask only for the annual accounts as they did many before, now they also ask for the quarterly and annual models presented in the treasury to see if they match those in the accounts.
If they do not match, the operation is canceled directly.
Also lately they are asking for the declaration of the income of the administrator of the company in case payroll is present.
They do this because banks in business loans no longer only sign by putting the company as collateral, it is usual for the administrator of the company to and even in some cases the partners of the company also have to sign as guarantors.
Why do they require even partners to sign as guarantors?
They do it to gain more guarantors and thus reduce the risk from the point of view in case of default.
When they get the partners of the company to sign, what the financial company achieves with this is to make not only a loan for the company but also a personal one with different guarantors.
Do you know what I have personally endorsed on the loan?
This phrase is very common in business loans and basically what it means is that despite having signed the loan the company the individual behind the business is also personally endorsing.
Personally, what he means is that it is as if he had signed a personal loan and therefore he is jointly and severally liable in the event of default and will respond with his present and future assets.
With this, the quarterly models of several years, latest annual accounts and data from the administrator and partners, if necessary, the financial company already has enough to be able to answer.
What if it is an entrepreneur who asks for the loan?
In the case of being an entrepreneur who requests the loan, and therefore the company is not running, other things are often asked by financial companies.
As the company cannot present quarterly models or any type of movement as the company is not yet created, what it will normally do is request other documentation such as business plans, feasibility plan….
That is, ask for documents to see the entrepreneur's business project to consider whether or not it is worth financing.
In any case, we have to say that today in financing for entrepreneurs, banks often ask that entrepreneurs risk the same as they do in the company.
I mean, an entrepreneur who has not invested anything in his business and asks for a loan to his bank of € 50,000, the first thing the bank will ask him is because they are going to take all the risk and the entrepreneur nothing.
In the loans for entrepreneurs it is frequently seen and in fact the least thing that any financier likes is to see that the entrepreneur who wants to start his project is not willing to risk anything.
For this reason, then the entrepreneurs who have invested in the creation of their business are better viewed, the bank considers that these entrepreneurs have risked and therefore are more valued.
Being an entrepreneur but someone else taking the risks in the event of failure is very easy, banks are very clear about this right now (with more reason after the last crisis), hence they want to see a degree of commitment on the part of the entrepreneur.
In fact, this requirement is not only from banks, public entities such as Enisa, which finances entrepreneurs in the implementation of their projects, demands the same.
This entity only finances the same amount that the entrepreneur has invested in his business.
If the entrepreneur has not put money into his ENISA business, he can finance € 0, on the contrary, if he has allocated € 20,000 for the ENISA business, he can finance up to € 20,000 at most.
You understand?
Another option is that you go to the financial companies that offer loans between individuals, which having a guarantee is enough to try to launch the operation.
Of course they will take into account the ability to pay customers but much of the study will depend on the guarantee provided.
In these cases they do not ask for all the documentation requested by the banks (models), but the presentation of the guarantee is limited.
Only within this financing there are a few loans that can be processed without endorsement where here it will be necessary to send the documentation only being able to access them the operating companies and not the entrepreneurs who have not yet created their business.
Steps when processing a credit for our business
1. The first step is always the most important and basically is to contact the financial company in which we intend to request financing.
This decision must be based on the probability of obtaining financing on that site.
Therefore, before doing any of this you should have informed yourself about the offer that that company has as well as its requirements.
It is assumed that by doing this you know whether or not you can process the financing because you will know whether or not you meet the required requirements.
If the financial company only gives business loans to businesses that are more than 1 year old and your company is only 4 months old, you know that this option is not valid for you.
It will be for many other entrepreneurs but not in your case.
2. In the application with the financial company, you must explain the situation both yours and the business, as the entity will ask.
The financial company in case you consider that you meet the minimum requirements will ask you for the documentation (the one that we have explained before with a few exceptions according to the processed loan)
3. By sending the documentation, the operation is for study. Important phase as you can imagine because here the financial company gives an answer about whether or not the operation may be viable.
It is necessary that you assume here that the fact that you can process the operation does not mean that it will turn out well for you.
There are many applications for financing in which the operation is studied, and the operation is later denied.
One thing is that you meet the requirements to be able to process the credit and another is that the finance company then approves the financing.
4. The last part is the one in which we know if the operation is approved or not. If it is denied, there is nothing more to do in said financial institution, if it is approved, it will be up to you whether or not you are interested in signing the credit.
Little more can we say about financing for companies, I hope it will be useful to you, being able to apply it if you have in mind to ask for a loan.
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