You might have learned all the steps to apply for a small business loan and have submitted your loan application as per the requirements. But what happens after that? Have you ever thought what the bank will be looking in your business to grant you the loan?

Well, this also forms part of the learning process about how to apply for a small business loan with a bank.

When as a small business owner you submit your loan application with the bank, the bank is required to follow certain written protocol while trying to evaluate each and every loan application. If you know what qualities the banks want in your business it will help you prepare your business plan & presentation properly.

The first point that any bank would like to know about a small business is – its owner’s credit history.  The credit history will tell the bank how capable the owner is to repay the loan amount. Therefore make sure your credit report is clear and doesn’t have any errors in it.

In case of any default from your side in payment, make sure you have given a valid explanation for the same with the respective agency. The normal practice is to get the credit reports from TransUnion, Experian and Equifax.

Also in your business plan or elsewhere make it a point to explain how you plan to repay the loan amount. When you are explaining about how capable you are as a business owner you definitely have to write few points about the collateral-in-hand.

Banks need to see what all collateral you have and what all becomes part of the loan security. Collaterals are assets that you own as part of your business or as your own (personal) which you are ready to provide to the bank as a security. Collateral also can be a guarantor who guarantees on your behalf about your loan repayment capabilities.

Next the bank will also be looking at your share in the business – that is the capital invested by you. This will show the bank how strong your role is in the future of your business and probably how serious you are in your venture.

The bank would very precisely like to know why you want the money and where all you are going to spend it. So make sure this part is covered in your business plan. Your back ground and education also forms a reason for the acceptance or rejection of your loan application.

Finally prepare an answer for the question – what will you do if the loan applied for is not granted? One clue that can be given is to paint always a bright picture about your business and your positive attitude.