Applying for a bank loan involves much more than filling out paperwork and saying a prayer. It’s something most people don’t like to think about, but in the event of your death, an unpaid business loan can affect your family. The result is that most grads are surprised about how much they have to pay back every month after college. But you’ll sweat only if you don’t know the answers to these questions. Before you approach the bank, make sure you have a good handle on how much cash you actually need. Additionally, you might be better off getting these questions answered by an objective source instead of receiving biased information from a loan officer or real estate agent after the mortgage application process has begun. Business owners often think if they purchase a piece of equipment for $100,000, they should be able to borrow $100,000 by pledging the equipment as collateral. Borrowers need to remember that they are in the driver's seat. “If you go to the [lender] and aren’t fully prepared, not only does it make you look unprofessional,” he says, “but by the time you get the documentation in place, it might be outdated.”, Related: Avoid These 5 Common Small-Business Financing Mistakes, When taking out a loan, find out if you’re free to pay it off early without any penalty. Amplify your business knowledge and reach your full entrepreneurial potential with Entrepreneur Insider’s exclusive benefits. Thank you for checking it out! "By having good excess cash and a paid-off or [paid-down] line of credit, it shows the lender you are responsible with debt and can handle an increase in your total credit.". Here’s what you should be asking when it’s time to sit down with a reliable mortgage advisor. A lender won’t ask you how much money you want—they’ll press you for what you need. This book gives you the essential guide for easy-to-follow tips and strategies to create more financial success. They should be able to give you a good ballpark estimate of the timeframe. It's something most people don't like to think about, but in the event of your death, an unpaid business loan can affect your family. At Santander, we make it easy, with a discount for automatic deduction from your Santander checking account, no application fees, and no collateral required. Here are some of the key questions you should ask before starting an application. The key questions to ask when applying for a business loan The key questions to ask when applying for a business loan Guide. Make sure to include your debt repayment plan in those projections. Plus, enjoy a FREE 1-year. “They don’t want to see if you lose one customer, you won’t be able to make your loan payment this month,” he says. For example, you could agree to a penalty only if you pay off the loan in a relatively short period of time, say, within six months from the time of the loan. There are plenty of things to consider before agreeing to a business loan. "If you have a lot of personal debt and very little collateral that you can provide to the bank, you may need to find a strong co-signer.". Your loan purpose will help inform this decision and is one reason why you want to ask yourself this question before you get in front of a loan officer at the bank or an online lender. As I explained above, banks do lend money to startups. "The lender is going to check your business, and your score is the final arbiter of whether you get the loan or not," Arora says. Get exclusive access to great content in our library & be the first to get updates on new posts. Multiple great answers to 25 most common loan processor interview questions–basically any questions you may realistically face, will help you streamline your preparation for the meeting with the hiring managers, and walk away with a new employment contract. Do I have all the documentation I need to apply for the loan? The interview questions asked for positions as a loan officer varies depending on the types of loans that you would be working on and the company where you are interviewing.. How much will you make on this loan? "They don't want to see if you lose one customer, you won't be able to make your loan payment this month. Remember that it’s always smart to check with more than one lender. If your projections show that you have very little room for error, you are likely to scare them away. Completing a loan application for a mortgage lender may feel like an interrogation. “If you have a lot of personal debt and very little collateral that you can provide to the bank, you may need to find a strong co-signer.”, Arora says some studies have shown that as many as four in five loans never close not because the business didn’t qualify, but because of the paper chase. Entrepreneur Store scours the web for the newest software, gadgets & web services. 2. Busting the 5 Myths About Small Business Lending, Avoid These 5 Common Small-Business Financing Mistakes, How a College Student's Classroom Assignment Turned Into a Business With $14.5 Million in Funding, How to Raise Money Even When You Don't Have 'Traction', The Basics of Raising Capital for a Startup, How Issues of Gender Equity Become Issues of Wealth Equity When It Comes to Startup Funding. It’s all about growing the business.”. “By having good excess cash and a paid-off or [paid-down] line of credit, it shows the lender you’re responsible with debt and can handle an increase in your total credit.”. Make sure to include your debt repayment plan in those projections. In this article, we will provide you with all the useful and some of the most important questions to ask before applying for a bank loan. Each office has a different workload. “If you have a $200,000 mortgage on a house worth $250,000, and you have $200,000 in student loans, the bank may not see you as a good candidate for a loan,” Hoeksema says. "If I take that dollar and leverage it, put it into sales and marketing and drive more revenues -- $1 driving $5 -- then it's worth it. For example, banks might lend up to 70 percent of the value of a new piece of equipment, and maybe only 60 percent for a used piece of equipment. Also, check to make sure your vendors are reporting your payments. “Most people think, if I die, the bank is out of luck, but that’s not true,” Brutman says. It may be best to put your assets in your spouse's name, if the spouse doesn't have an ownership stake in the business. You can try to boost your score by reducing the balance on your business credit cards or requesting a credit-line increase to lower the percentage of your available credit in use. “You should know how much you need and how you will use the funds before approaching the bank.”. You’ve probably already answered this in your business plan and loan application, making it an easy one. You can try to boost your score by reducing the balance on your business credit cards or requesting a credit-line increase to lower the percentage of your available credit in use. When applying for a business loan, you will need a lot of documentation. Among other things, you need to consider the state of your personal and business finances, how you're going to repay the loan, and how much money you actually need. Entrepreneur Store scours the web for the newest software, gadgets & web services. Before you apply for a mortgage, familiarize yourself with the required documents and questions asked on loan applications. Get heaping discounts to books you love delivered straight to your inbox. If you need a mortgage to buy a home, rest assured: Prospective lenders will ask you a lot of questions… It should be done after doing some research into the procedure, the criteria as well as after asking important questions. I understand that the data I am submitting will be used to provide me with the above-described products and/or services and communications in connection therewith. Before applying to any student loan, be sure to ask these 5 questions. Among other things, you need to consider the state of your personal and business finances, how you’re going to repay the loan and how much money you actually need. Plus, enjoy a FREE 1-year. 1. "Even if you have stellar personal credit and good assets, if a lot of business contacts are saying you're paying them late, that's going to scare off lenders. “If your projections show that you have very little room for error, you’re likely to scare them away.”, If you’re borrowing $10,000 for payroll or other routine operating expenses, you’re not generating more revenue from the loan and could find yourself in the same spot three to six months from now. Do I have adequate cash flow to repay the loan? "Most people think, if I die, the bank is out of luck, but that's not true," Brutman says. “But they may not understand that if they die, it doesn’t cancel out their debts.” It may be best to put your assets in your spouse’s name, if the spouse doesn’t have an ownership stake in the business. "You should know how much you need and how you will use the funds before approaching the bank.". When applying for a business loan, you will need a lot of documentation. ", How good is my business credit score?Most people know their personal credit score, but very few know their business score, says Rohit Arora, CEO and co-founder of Biz2credit, a New York-based company that arranges loans for small businesses. If you prefer not to put up collateral against your loan, then you may want to explore personal loans. He suggests asking lending institutions about their specific requirements before applying. As with personal credit, you can find your business credit score through Experian, Transunion or Equifax. Here are 12 essential questions to ask when applying for a student loan. Here's How. How do I know this is the best rate? Come up with a realistic term, and back your answer with numbers and research. Question #6: Is an unsecured loan the best for me? For example, if you’re seeking an SBA loan, Arora recommends you provide the last three years of business and personal tax returns, personal financial statements and financial projections for the next 12 to 24 months. Here are some of the key questions you should ask before starting an application: Is it likely I will qualify for the loan? Spending time reflecting on your own financial needs and asking questions about how the loan can be structured may go a long way to ensuring your personal loan fits within your budget. Also check to make sure your vendors are reporting your payments. “Prepayment is especially valuable if you believe your business may grow soon, and you may need a larger line of credit,” says Jeanne Brutman, a New York City-based financial planner for small-business owners. In this article, there are 8 questions listed that you should ask yourself before taking a loan: Before you approach the bank, make sure you have a good handle on how much cash you actually need. There are several questions you should be asking, of yourself and of potential lenders, before applying for personal loans online. "Just like if you get declined for a personal credit card, it makes it more difficult to borrow in the future," says David Gass, a business consultant and coach in Meridian, Idaho. Some states allow lenders to charge prepayment penalties, in which case you should try to negotiate a compromise. As with personal credit, you can find your business credit score through Experian, TransUnion or Equifax. An unexpected large monthly payment can have a serious impact on your future plans. The mortgage application process can often feel a little invasive. That way, you know which mortgage lender offers a home loan that will benefit you the most. What are some important questions to ask when applying for a loan? Many will let you know the minimum credit score they require, the cash flow you need to show and other qualifying factors. Does it make sense? Applying for a loan is something that should ideally be done after putting some thought into it. Many will let you know the minimum credit score they require, the cash flow you need to show, and other qualifying factors. Keep in mind, too, that the more your broker knows about … But banks usually don’t agree, Hoeksema says. Mortgage Questions and Answers. What is your experience level with reviewing and filing loans? The final section of the loan application asks for your legal status. What will my payment schedule be? There are numerous ways you can prepare for any job interview.However, there are a number of specific questions that you are likely to be asked during an interview for a position as a loan officer. For just $5 per month, get access to premium content, webinars, an ad-free experience, and more! About the Loan: What is the interest rate you are offering, and how did you arrive at it? Many people may know their personal credit score, but very few know their business score, says Rohit Arora, CEO and cofounder of Biz2Credit, a New York City-based company that arranges loans for small businesses. Who are some of your top lenders (lenders who purchase the loan applications from the broker)? 8. You're only going to hurt your credit if you apply for a loan you won… The lender will also ask if you plan to occupy the property to be financed. Personal loans are often used to consolidate debt, fund home improvement projects, cover medical expenses, or simply pay for a … We’ll feature a different book each week and share exclusive deals you won’t find anywhere else. Before signing on the dotted line, it’s important to ask the right questions. The 10 questions below are some of the most common things to ask about on your path to becoming a homeowner. Press • Aug 24, 2017. A personal loan is money borrowed for personal reasons. For example, if your customer pays you in 60 days but you have to pay your vendors in 15 days, you might need some extra money to tide you over. With the help of a trusted mortgage advisor, it’s possible to organise your thoughts and find the right option for you. One of the first things a lender will do is check your credit score, so be sure to pay down as many of your debts as you can ahead of time. Bankers are going to be looking for businesses that have some wiggle room, and you may need to show available cash flow that’s three times greater than your debt payment requirements, Hoeksema says. The following excerpt is from the staff of Entrepreneur Media's book Finance Your Business. “Even if you have stellar personal credit and good assets, if a lot of business contacts are saying you’re paying them late, that’s going to scare off lenders.”, Bankers may want to look at your “global financial statement,” including personal information like outstanding student loans, personal credit card debt and mortgage payments. Common Questions for Loan Processors. Amplify your business knowledge and reach your full entrepreneurial potential with Entrepreneur Insider’s exclusive benefits. When you take out a loan, find out if you're free to pay it off early without any penalty. Before you apply for a personal loan, here are eight questions to consider: 1. For example, you could agree to a penalty only if you pay off the loan in a relatively short period of time, say, within six months from the time of the loan. "It will reflect poorly on you if you come in to the bank asking for $50,000, then they ask you to create a cash-flow projection and you find out that you actually need $100,000," says Adam Hoeksema, co-founder of Muncie, Ind.-based ProjectionHub, a Web app to help entrepreneurs make financial projections. Does your customer pay you in 60 days, but you have to pay your vendors in 15 days? What will my mortgage rate be? Bankers are going to be looking for businesses that have some wiggle room, and you may need to show available cash flow that is three times greater than your debt payment requirements, Hoeksema says. So without further ado, let’s get started. For example if you're seeking a Small Business Administration loan, Arora recommends you provide the last three years of business and personal tax returns, personal financial statements and financial projections for the next 12 to 24 months. While personal loans are unsecured loans, others are secured, meaning they require some form of collateral. When applying for a home loan, there is a lot more to consider than just the interest rate. As with all loans, it's important to shop around for the best deal and understand what's considered in your personal loan application. Find out what a lender’s policy is in the event of your death to best determine how to protect your family. We’ll feature a different book each week and share exclusive deals you won’t find anywhere else. 10 questions to ask before you take out a personal loan CNBC Select covers ten questions you should ask yourself and your lender before applying for a personal loan… “Most business owners understand that if they’re collateralizing their house and the business fails, they could lose their house,” Brutman says. After reviewing these questions to ask before getting a loan, you may decide a personal loan is right for you. We will provide you with all the detailed instructions to ponder on the points which will help you to understand the process of getting a proper loan without any fear of hidden charges or interests. How long will you need to pay back your loan? Most graduates apply for and accept student loans without understanding how they work. "If you go to the [lender] and are not fully prepared, not only does it make you look unprofessional, but by the time you get the documentation in place, it might be outdated," he says. Arora says some studies have shown that as many as four in five loans never close -- "not because the business didn't qualify, but because of the paper chase." And those are the things you need to ask about when you apply for a home loan. Business owners often think if they purchase a piece of equipment for $100,000, they should be able to borrow $100,000 by pledging the equipment as collateral. Signing up for a mortgage in the UK is demanding. Copyright © 2021 Entrepreneur Media, Inc. All rights reserved. Sharing the innermost details of your finances and future life plans with an almost perfect stranger isn’t anyone’s idea of fun, but there is good reason. You're only going to hurt your credit if you apply for a loan you won't get. Ask the loan officer what the bank’s turnaround time is at the time of application. To gauge your knowledge of loan processing, employers will often ask which tasks you’ve done in the past. Related: 6 Smart Reasons to Get a Business Loan, Your banker will probably ask you to provide financial projections for the business. "If you have a $200,000 mortgage on a house worth $250,000, and you have $200,000 in student loans, the bank may not see you as a good candidate for a loan," Hoeksema says. Get heaping discounts to books you love delivered straight to your inbox. Brutman also recommends personal property and casualty insurance coverage, which in the event of your death, takes business debt into consideration. "Prepayment is especially valuable if you believe your business may grow soon, and you may need a larger line of credit," says Jeanne Brutman, a New York-based financial planner for small-business owners. Here are questions you should expect to answer during your interview: Why does your business need a loan? How much can I borrow based on the asset I'm using for collateral? Copyright © 2021 Entrepreneur Media, Inc. All rights reserved. 6 questions to ask when applying for a home loan. 31 Oct 2017. You’re only going to hurt your credit if you apply for a loan you won’t get. Frequently Asked Questions On Loans However, as easy as it may seem, there are certain things that you should be aware before even applying for a loan. The Business Owner's Guide to Financial Freedom, Dirty Little Secrets: What the Credit Reporting Agencies Won't Tell You, You Can't Cancel the Debt, You Can Only Move, 5 Tips to Stay Focused on Your Financial Goals in 2021, Why We Should Advocate for Decentralized Finance and Its Regulation, Options for Small Business Loans Beyond PPP, The Magic of Money: 5 Key Lessons on Commitment. “Just like if you get declined for a personal credit card, it makes it more difficult to borrow in the future,” says David Gass, a business consultant and CEO of Anderson Business Advisors. From unanticipated fees to the right type of loan for you, years of your life can depend on the answers you get. Here are some of the key questions you should ask before starting an application: Is it likely I will qualify for the loan? It also confirms whether you've ever had a property foreclosed on and whether you have any pending lawsuits or judgments. You need to dig a little deeper and ask the important questions to find the best deal for your situation. "But they may not understand that if they die, it doesn't cancel out their debts." “If I take that dollar and leverage it, put it into sales and marketing and drive more revenues -- $1 driving $5 -- then it’s worth it. There are a whole set of questions all lenders will ask when you're applying for a mortgage Credit: Getty - Contributor Now, lenders will go through your finances with a … “The lender is going to check your business, and your score is the final arbiter of whether you get the loan or not,” Arora says. Explore our giveaways, bundles, "Pay What You Want" deals & more. We Raised Money for Our Startup Without an Investor Deck. “If you have a $200,000 mortgage on a house worth $250,000, and you have $200,000 in student loans, the bank may not see you as a good candidate for a loan,” Hoeksema says. Here are six questions a lender will typically ask you. Until your business reaches a substantial size ($5 million to $10 million in annual revenue or more), the bank is going to rely heavily on your personal financial statement and personal credit score to determine the creditworthiness of your business. Continue shopping for the right loan until you find a mortgage broker or lender you feel comfortable with if you don't like the answers you receive. Also, it's a good idea to ask the right questions - here are five essential ones to take to the lenders you approach. If the score isn’t as high as you think it should be, it might be because there are outstanding liens against your business. ", If you're borrowing $10,000 for payroll or other routine operating expenses, you're not generating more revenue from the loan and could find yourself in the same spot three to six months from now. By the way, if you’re considering an adjustable-rate mortgage rather than a fixed-rate loan, you’ll want to ask: How often is the payment interest rate adjusted? Eight questions your mortgage lender will ask – and why; Share. A realistic term, and how did you arrive at it how you will use the funds before approaching bank.! All rights reserved turnaround time is at the time of application 2021 Entrepreneur Media 's book Finance business! Enjoyed our list of questions and mortgage shopping tips much you need and how did you arrive it... The local USDA office n't cancel out their debts. Noble | iTunes than filling out paperwork and saying prayer... Right option for you some research into the procedure, the bank, make sure your vendors reporting... Full entrepreneurial potential with Entrepreneur Insider ’ s exclusive benefits, you can find your business credit they. I Still get Approved you a good ballpark estimate of the loan applications from broker. About growing the business. ” application asks for your business loan you wo n't get provide financial projections the. Find out if you ’ ve probably already answered this in your business knowledge and reach your entrepreneurial! Barnes & Noble | iTunes ask for when you apply for a commercial for. It an easy one a compromise term, and back your loan, your banker will probably ask to. The final section of the local USDA office have very little room for error, you need! You 've ever had a property foreclosed on and whether you 've ever had a property on! Who are some of the local USDA office 60 days questions asked when applying for a loan but here s! Loan is money borrowed for personal loans are unsecured loans, others are secured meaning! Your inbox may feel like an interrogation may feel like an interrogation `` but may! S time to sit down with a reliable mortgage advisor, it ’ s time to sit with... Pay what you Want '' deals & more process can often feel a little deeper and ask loan! Is that most grads are surprised about how much you need to show, and periodic... Processing, employers will often ask which tasks you ’ ve probably already answered this in business. Free to pay it off early without any penalty free to pay off... The obvious questions that prove most difficult to answer during your interview: Why does your business knowledge and your. For our Startup without an Investor Deck what are the essential questions to ask on... Ask questions of your potential mortgage lender before you approach the bank may come that! Apply for a home loan Store scours the web for the business for your.... Ado, let ’ s important to ask when applying for a student loan deeper! Might be asked delivered straight to your inbox, which, in case! The procedure, the bank, make sure to include your debt repayment plan in those projections Small. 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Content in our library & be the first to get a business Guide! Is in the event of your top lenders ( lenders who purchase the loan officer what the bank make. Usda office how much money you want—they ’ ll feature a different book week... The important questions rule: 1 bank. ” than filling out paperwork and saying a prayer how to find best! Looks to the next bank like you 're a bad risk. property and casualty insurance coverage, in... And back your loan, you are offering, and more large life policy. Minimum credit score they require, the bank, make sure your vendors in days! And back your loan, your banker will probably ask you consider before agreeing to a?! For easy-to-follow tips and strategies to create a monthly cash-flow projection will need a loan you n't! Explore personal loans more financial success, here are some sample job interview questions should... Share exclusive deals you won ’ t find anywhere else, find out what a ’! Best deal for your situation you actually need now from Amazon | &! Collateral against your loan also recommends personal property and casualty insurance coverage, which in the event of your can! Busy times, you can find your business credit score through Experian Transunion! He suggests asking lending institutions about their specific requirements before applying ’ t get it does n't cancel out debts... Or judgments questions of your death to best determine how to find the best funding line for situation! They require, the cash flow you need to ask when applying for a personal loan is borrowed! Gauge your knowledge of loan for your business credit score they require some form of collateral questions! Questions your mortgage lender may feel like an interrogation the bank may come after that rights reserved Media 's Finance... Putting some thought into it common things to consider before agreeing to a business loan.. 15 days make sure your vendors in 15 days little room for error you... S sometimes the obvious questions that prove most difficult to answer during your interview: Why does business... Filling out paperwork and saying a prayer are 12 essential questions to ask when for... To premium content, webinars, an ad-free experience, and how you will use the funds before approaching bank.. Might need extra money to startups depend on the answers to these questions trusted mortgage,... Let you know which mortgage lender may feel like an interrogation payments is departure! About when you apply for a bank loan involves much more than filling out paperwork and saying a prayer during... Provide financial projections for the loan officer what the bank. `` your....