a) Business Records
It is prudent for every business to keep records. These include simple records like sale receipts, invoices to customers, delivery notes and others. These help in calculating the sales,purchases and expenses figures. These figures will in turn be very crucial in determining the profitability of the business.
The bank will lend to you with the business profitability in mind because it is part of profit that will repay the loan installments. The profits will keep the business afloat.In bigger businesses, books of accounts are prepared and capture the position of the business in terms of profitability better and give a clearer picture of the business sustainability.
b) KYC Documents
These are the “Know Your Customer” documents. They assist identify you as the business owner or manager and ascertain the legal status of the business. These include identity cards,tax pins, memorandum and articles of association and others. These also help in vetting and checking against existing databases for reported cases of frauds, forgery, money laundering, drug dealing,terrorism amongst others. Every bank has a duty to the state to assist fighting such crimes and the banks are usually very careful to identify and report such unlawful deals. The KYC documents are very important and most Central banks require banks to collect and verify these documents.
c) Business Ownership Records
The bank needs to ascertain that you are the true owner of the business. This is to avoid lending to the wrong people like business employees purporting to be owners and fraudsters. You require a business permit from the relevant authority like the county or municipal councils which will read your name or that of the entity you have registered. You also need certificate of registration for business names and certificate of incorporation and articles of association for companies. The bank will finance only the owner who has an interest in the business.
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d) Bank Account Statements
This shows how you have banked the sale proceeds. As much as the figure of sales can be estimated from the receipts, the bank statement helps in verifying the figure. If you make sales of one million per month, then the money banked should reflect this. Any big variances should be explained. The statement also shows any loan repayments drawn from the account and how prompt and often they run. It also assists in verifying the information about the customers and suppliers as their narrations may appear in the bank statements as they pay or as they are paid.
e) Security Documents
Most of business loans are secured. It is necessary that you avail a copy of the item you intend to use as security. This shows commitment and willingness to repay on your side. Documents to present include copies of logbooks, title deeds for landed security,copies of share certificates, receipts for machinery bought, or any other document as situation may have it. In case a guarantor is needed avail their details too at this stage.
These documents list is not exhaustive but it assists the financier to assess the ability and willingness to repay the loan at a glance. They give a sneak preview to the credit proposal. Have the documents in hand while you visit the bank so that the banker makes the lending decision faster. This will safe you time and energy and avoid the back and forth.