You may be facing a choice between applying for an unsecured working capital loan or a conventional bank loan, and weighing the pros and cons. If so, then one of the key aspects you definitely want to analyze is collateral.

Why Banks Demand Collateral

As you may know, banks offset the risk of lending onto borrowers by demanding that they collateralize the loan with assets such as property, vehicles, equipment, securities and so on.

However, an extremely important point that some business owners aren’t aware of when they apply for a collateralized small business loan from their bank, is that they might not see eye-to-eye on certain aspects. Specifically, there are 3 common stumbling blocks that many business owners trip over -- and often through no fault of their own:

1. Disagreements on an asset value.

If you’ve ever shopped for a home, a used car (or even sometimes a new one!), or any other “big ticket” item, you’re aware that prices can vary; and often considerably. Well, when...

One of the most shocking things that small and mid-sized business owners discover – as with talk with them on a daily basis – is that the bank business loan application process is excessively long. We’re talking several months here, not weeks.

What’s behind the massive delay? It’s that banks frankly don’t want to give business loans to small and mid-sized business owners. They want to focus on larger businesses with deep pockets, and of course, boosting commercial and residential mortgages, selling mutual funds and other investments, and promoting their beloved HELOCs. 

Of course, banks don’t want to come out and tell small and mid-sized business owners to take a hike. It’s not good public relations. And so they’ve made their business loan application process excessively, and in many cases prohibitively long. At the same time, they’ve dramatically hiked their business loan requirement criteria, and the due diligence process is more invasive than ever before.

The bottom-line for smal...

Today we’re continuing our look at some of the most frequently asked questions that we’ve received over the years, by answering an inquiry that comes up many times throughout the day: “What do I need for a business loan?”

What the Banks Require for a Business Loan

If you apply for a business loan from your bank -- which is certainly your choice if you decide that’s the right decision for you -- then you should be prepared to submit many official documents, including: 

• P/L statements for at least the last two years (though in some cases longer will be required).
• Your personal and business credit scores, which will need to be very high and virtually flawless -- any dings, even if they occurred years ago, will likely lead to your application being rejected.
• Your strategic business plan, which must be include comprehensive financial projections, marketplace and competitor analysis, and so on.
• A detailed, up-to-date resume for every key staff member in your business.
• A detailed per...