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What do lenders look at?

When you apply for finance on a piece of equipment, a lender will try to asses how risky it is to lend money to you or your business.

To do this they look at a number of different indicators to understand how healthy your business is, and how likely they think you will be to make your repayments.

Below is a list of the main things they will look at when reviewing your application;

How do you make money?

Financial providers want to understand how your business operates and makes money. Either over the phone or in a few sentences they will ask for a description of your main sources of income.

Credit score

Although you are probably financing against your business, a better personal credit score can generally mean a better rate for your loan — especially if your business is on the smaller side. Lenders generally won't accept scores below 600 and anything above 800 is considered very good.

Bank statements

Your last 3 months of bank statements provides the real situation of what is happening in your bank account. Whether you're in the black or red is less important - they want to see how much money comes in and out of your account on a monthly basis to understand if you have a healthy cashflow.

How old your business is

Lenders want to understand how likely you will be to pay back the money you borrow. How long your business has been around can be a good indicator of whether you're likely to be around for the full term of your repayments. i.e. the older your business is the better when it comes to finance!

The size of your business

Another indicator of your likelihood of making repayments is the size of your business. You don't have to be huge, but lenders will compare things like your turnover or number of employees to the amount you are trying to borrow and gauge whether they think you can make the repayments.

Past loans or finance

Much like other aspects of business, your reputation means a lot. Past loans or finance you have taken out are a great indicator of your ability to make repayments. If you have a healthy credit file and don't miss out on your payments this will be a big positive indicator to a lender — especially if your previous loans are close to the amount you're trying to borrow.

Other things lenders might ask you for

If a lender is having a hard time verifying your business or there isn't a lot of information in your credit file they will often ask for more information to fill in the blanks.

Here are some common documents a lender will request to better understand your business;

Tax returns

Tax returns can help verify the identity and legitimacy of your business. These help show that the income you've reported to lenders is the same as what you're reporting to the government. They can also make it easier to find more information on your business as a legal entity.

Other documents

Business licenses, incorporation documentation or financial statements showing profits and losses, or assets and liabilities are also commonly asked for. Again, these documents help fill in the gaps and add context to show the real risk of lending money to your business.


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