When you start your small business, it is unlikely that you will have the funds to pay for everything. Small business loans are one of the most common sources of funding for a small business, but obtaining a loan isn't always easy. This is where the specialist knowledge of a commercial mortgage broker comes in. With their experience in dealing with different small business lenders, and a diverse range of clients, they are in a very good position see the solution and assist where necessary.

Below are some of the key factors that the bank uses to analyse a potential borrower.

Ability/Capacity to Repay
The most important thing the banker wants to know is you ability to repay the loan. This usually comes in the form of cash flow from your business plus a secondary source such as collateral. Banks will review your business past financial statements. Generally, banks feel most comfortable dealing with a business that has been in existence for a number of years because they have a financial track record. If the business has consistently made a profit and that profit can cover the payment of additional debt, then it is likely that the small business loan will be approved.
If however, the business has been operating marginally and now has a new opportunity to grow or if that business is a start-up, then it is necessary to prepare a thorough loan package with detailed explanation addressing how the business will be able to repay the loan.

Credit History
One of the first things a bank will determine when a person/business requests a loan is whether their personal and business credit is good. Therefore before you go to the bank, or even start the process of preparing a small business loan request, you want to make sure your credit is good.

Credits history can be obtain from past credit cards, mortgages, student loans, etc. Each credit will be listed individually with information on how you paid that credit. Any credit where you have had a problem in paying will be listed towards the top of the list. These are the credits that my affect your ability to obtain a small business loan.

If you have been late by a month on an occasional payment, this probably will not adversely affect your credit. However, if you are continuously late in paying your credit, have a credit that was never paid and charged off, have a judgment against you, or have declared bankruptcy in the last 7 years, it is likely that you will have difficulty in obtaining a loan.

In some cases, a person has had a period of bad credit based on a divorce, medical crisis, or some other significant event. If you can show that your credit was good before and after this event and that you have tried to pay back those debts incurred in the period of bad credit, you should be able to obtain a small business loan. It is best if you write an explanation of your credit problems and how you have rectified them and attach this to your credit report in your loan package.

Equity

Don't be misled into thinking that start-up businesses can obtain 100% financing through conventional or special loan programs. A business owner usually must put some of her/his own money into the business. The amount an individual must put into the business in order to obtain a loan is dependent on the type of loan, purpose and terms. For example, most banks want the owner to put in at least 20 - 40% of the total request.

Experience

A client that wants to open a business and has no experience in that business should not seek financing let alone start the business unless they intend to hire people who know the business or take on a partner that has the appropriate experience. Regardless, the client should be advised to take some time to work in the business first and take some entrepreneurial training classes.
 

It could be a pub, hotel, restaurant, garage, bed and breakfast, hairdressers, cafe, guest house, shop, newsagents, block of flats, nursing home, care home, small business, start up or ongoing concern.