Do you qualify for a business loan from your bank?We were curious to see how simple or difficult it would be to get a working capital loan from some of the major banks. Instead of just calling one bank, we decided to call five of the largest banks to see the differences between them all. We used the same scenario with all the banks. Here’s the business loan scenario we used: We had 5 different people all call s the business owner that was looking for $100,000 working capital loan. The pretend business owner said they had a 660 credit score, and had two other partners with similar credit but less than 660 credit scores. We mentioned the three business owners; all had equal shares in the business. Each pretend business owner told the bankers that they have been in business for 5 years, and that they have not filed their 2012 tax returns.
What we discovered was all 5 banks had the following similar guidelines:
The bankers from five banks said that the loan amount was no problem, but if they needed more than $100,000 that their loan would need to be submitted to a different department within the bank. From what we understand, you can get a working capital loan up to $100,000 and they can handle that in their branch. If the loan were to exceed that amount, they would send you to a different department. They also said with a credit score under 680 might be an issue. All five banks said their credit score requirement is a 680, but if I had some compensating factors they might be able to get an exception. All five banks required proof of income, and he said that they will need 2011, 2012 returns for both personal and the business. Some even required three years of tax returns plus year to date profit and loss. All five banks mentioned if there is a loss on the tax returns, the underwriters would decline the loan. We had one last hurdle for the banks; we told them that there was going to be only one of the three business owners on the loan. All five banks said all owners must be on the loan and sign for the loan.
We were also able to find some surprises that will be beneficial to their loans:
Some of the banks said if the loan amounts were under $50,000; these could possibly be an unsecured business loan. They also said the business owner would have an option of having either a term loan or a line of credit. All five of the banks did request that the business have or open a business bank account with the bank if they proceeded with the loan if they didn’t already have one with the respective bank.
So what we learned from this little test case:
· Banks require a minimum of 680 credit score
· Banks require 2 year minimum tax returns (personal & business)
· Banks said you can’t show a loss on any of the tax returns
· Banks require all business owners to be on the loan
Alternative business loans with First Capital Business Finance:
· We allow credit scores as low as 480
· We use bank statements for proof of income or merchant statements
· We don’t need tax returns, so it won’t matter if you showed a loss
· We don’t require all business owners to be on the loan
If you’re interested in hearing more about our business financing programs, please feel free to call First Capital Business Finance 888-565-6692 and one of our loan experts will be happy to answer any of your questions.