What Entails the Commercial Loan Application Process

First-time borrowers can find the loan application process intimidating but in essence, the process is fairly straightforward. Most commercial and business financing usually follow the same process even though some specific steps will tend to vary from business to business and lender to lender.

When armed with the right information and documentation and know what to expect, business owners will smoothly, easily and comfortably navigate through the loan application procedure.

Essential steps in the loan application

Step 1

Discuss with accredited finance broker on the prevailing situation

Speaking with a finance borrower can enable borrowers to identify business loan types, leased or other credit products that suit your unique business needs. An expert can evaluate the funding scenario so as to identify a suitable lender and aid estimation of the crucial requirements and the length of time it is possible to obtain the required funding.

Step 2

Make the loan or lease application

To smoothly peruse through various documentations like the business profile during the lease or loan application, you will need to engage a finance broker. A business profile will normally include information such as the business type, total employees numbers, profit and loss statement, annual sales of a company, recent ownership details, and other information showing the length of time the business has existed. If the company is a startup, the lender will insist on to viewing the business plan. It will also be necessary to provide the collateral information in the case where the loan is secured. Some of the collaterals are property, accounts receivables, supplies and inventory, personal real estate, business real estate or business equipment. The financial broker is in a better position to access several potential financiers.

Step 3

Take a moment for the documentation to be accessible to the lender

The lender after receiving the information will review and verify the documents authenticity, applicant’s credit rating and credit file, and the business background and financial history. As the lender examines the document, you will receive various updates from your finance broker.

Step 4

Receive the loan approval

After the application is assessed and all goes well, there will be some necessary paperwork that the lender and the borrower will need to sign. Afterward, the necessary funds will be disbursed, or the loan will settle any needed property purchases.

Other important things involved in the commercial loan application process

The duration of the business lease or loan approval

The unique circumstances surrounding the business and the type of lender will determine the amount of time it will take for the business loan to be approved. For that fact, depending on the transaction complexity, it can take a short duration of several days or along duration such as several months.

Available business lease and loan financing types

Most funding these days that most businesses source for are usually secured. Business owners will be able to enjoy similar financing options even if the specific financing offers tend to vary. Therefore, some of the most common financing options around are;

  • Business growth financing
  • startup financing
  • Motor vehicle financing
  • Debtor/inventory financing
  • Plant/tools and Equipment financing
  • Trade financing
  • Business property financing

The amount that the business can borrow

Applications that have a good success chance are from borrowers who have a good credit rating, offer a good security and their applications are supported by a good financial history and background.

How long will a borrower take to repay the loan?

The term of the business loan will usually range from one to 15 years, but it defers from lender to lender. The loan term will also be affected by the borrowed amount. Some lenders can provide a loan term as long as 30 years when a business loan is buffed up with a residential property security. The principal will be requested upon a loan’s maturity even if the loan is structured on an interest-only basis.

What the loan approval process involves

A pre-approval/conditional approval

Once all your application and supporting documents reach the lender, they will be assessed and swifed to ensure they attain the set policy.

In some circumstances, although the lender will place and approval, it will be subject to some conditions. For instance, the bank can set a condition making it acceptable to use the property as security. However, in the event that you have no property yet, the lender can give you a pre-approved loan.

It implies that the loan will be approved as long as it the property presented meets the set guidelines.

Most lenders make the pre-approval valid for only 90 days. The period can be extended through the provision of other documents since some people will buy a property before seeking a pre-approval. Specifically, they will sign the property purchase contract and later seek the loan. However, it is sometimes risky since you might lose the property’s deposit if you fail to obtain the loan.


Once you have identified the property to be utilized, a valuer from a separate company will seek an appointment so as to inspect the property as banks normally don’t employ valuers.

There are a couple of instances where the tenant can delay the accessibility of the property to the valuer while other cases when the valuer may not be needed since the risk of the applications might be very low.

However, it is possible for the finance broker to talk with some lenders so that they can skip the pre-approval and valuation steps and head straight to the formal approval through ordering an upfront valuation.

Formal approval/unconditional approval

Formal approval or unconditional approval occurs when the lender has everything needed to lend the borrower money.

For complex applications or in a situation where not all the upfront needs of the lender have been addressed, the bank may request additional documents before it finishes the approval. At times, this may make obtaining a final approval to take longer.

Issuance of a loan offer

Upon a formal approval of the loan, you will be needed to sign the loan contract that the lender will send you. If you need further independent legal advice, you can pick a solicitor to assist you through the contract. After signing the contract, it will be given back to the lender together with further requirements for loan settlement.

Who are involved in the application process

The parties that are involved in the application process are;

  • Real-estate agents.
  • Tenants
  • LMI providers and insurers.
  • Building inspectors.
  • Solicitors or conveyancers.