When you’re first entering the business side of finance, the terminology can get confusing very quickly. Patriot Commercial Lending Solutions is here to help you understand the various vocabulary that is crucial to understanding the inner workings of the financial sector and how it affects your business. Small business loans exist for the soul purpose of making opening or expanding a business available to the everyday citizen. This money can be used for operational costs such as renting a larger space, equipment leasing and so much more. . During this process you’ll undoubtedly come across the “underwriting process” and you’ll need to know what it is so you can successfully navigate your business finances.
Understanding Small Business Loans
Underwriting is the process that will lead you to the final approval or denial of your small business loan. Whether or not it’s approved or denied is determined by a professional underwriter. The professional underwriter’s decision is ultimately dependant upon several factors. Throughout the underwriting process, the factors are all under in-depth scrutiny by specialized software, as well as the professional underwriter’s eye.
Factors of Acquiring The Business Equipment Loan You Need
To begin, there’s the application process. To file a formal application, you’ll need to provide evidence of current income and current assets, alongside your current credit score and an estimate of your existing debts. After that, there are assessments made on the item that you’re taking the loan against, whether the purpose of the loan is for business equipment or a different type of commercial finance. This assessment is to ensure that there are no liens against the property and that the loan is worth making. After this introductory step is completed, your equipment loan will officially move onto the underwriting process.
Credit Reviews for Commercial Finance
Obviously, as it is with any loan, your credit score will heavily affect whether or not you’re eligible for the loan you’re applying for. During the underwriting process, your entire credit report will be heavily analyzed including the type of credit you posses and how you use it. Various ways that you manage your credit could be red flags to the professional underwriter. However, as it is with most loan applications, the better your credit the more likely your approval will be.
Your Income to Debt Ratio
A major portion of the underwriting process is your income to debt ratio. They’ll merely calculate this by looking into your monthly expenses in relation to your monthly income. If you pay $1200 in credit card debt per month and your monthly income is only $2000 per month, it’s doubtful that they’ll give you a loan where you’re expected to pay $600 per month as no one will be able to make that work.
Equipment Leasing Requires Income Verification
When your loan is being underwritten, you’ll need to provide proof of income. Most people use an official pay stub that shows their year to date earnings. This will display your weekly or bi-weekly pay and will be sufficient evidence that you get regular income so you’re not a liability. If you work on commission, you’ll probably need more evidence of your steady income. Try submitting a tax document as proof as those are a great way to document your yearly income.
Patriot Commercial Lending Solutions can help guide you through your small equipment leasing process so you can get the best small business loan to suit your ambitions. Contact us to start pursuing your dreams of entrepreneurship and ambition.