5 Questions to Ask a Business Loan Officer

Applying for a loan can be daunting because of the bureaucracy and technical details; however, loan officers can lighten the load for business owners. Apart from helping clients file loan applications, Maryville University outlines how a loan officer will review and decide on the procurement of the loan after evaluating a client's financial documents, such as their credit history and income statements. This ensures that loan officers can offer clients appropriate advice and recommendations within their financial limits.

If you’re unsure about what to ask your business loan officer, here are five questions you should keep in mind:

What do I Need to Prepare Before Applying for a Loan?

The US Chamber of Commerce shared that you must provide your business financial statements, which include information about current profit and loss statements from the last three fiscal years, a cash flow statement, and your balance sheet. Besides your financial statements, you must also present your bank statements and personal and business income tax returns for the last three years. Loan officers may also ask for you to disclose any existing ownership and affiliations you may have with other businesses. If you have these documents prepared, loan officers can quickly help you plan and process your loan application.

What are My Payment Options?

Because of technology, most lenders today have turned to automatic debits via an ACH withdrawal directly from your bank account. This way, you no longer need to conduct meet-ups or send cash personally to your lender. Besides being convenient, this ensures you won’t miss deadlines and incur a penalty for missing payments. You only need to ensure that you have enough funds in your bank account to provide continuous payments. However, if electronic payments are unavailable, some lenders still accept paper checks from the borrower if it’s part of their agreement. Let your loan officer know which method you prefer.

How Much Can I Get from the Loan?

Because different loans have various conditions and maximum amounts you can borrow, it’s important to know what you’re financing first. If you’re starting a small business, you can apply for a US Small Business Administration loan (SBA loan) since they are low-cost government-backed loans. Whether you’re planning to buy a business, acquire working capital or buy equipment for your enterprise, SBA loans allow you to borrow up to $5 million. The downside of SBA loans is their lengthy application process. If you’re not in a rush to receive funds and want lower interest rates anyway, SBA loans can help you finance your business. Don't be afraid to ask your loan officer which is the best loan option for you, depending on your finances.

What are the Interest Rates and Total Costs?

Banks and investors will charge a fee for the administration of the loan and the money borrowed over time. Our previous article on ‘Business Loan APRs’ shared that annual percentage rates (APR) are the yearly rate charged for a loan. This includes all borrowing costs such as origination fees, interest, and other upfront costs. APR is one way to compare loans and assess which financing options work best for you. For example, if you were to borrow $10,000 and your total payback was $11,500, your total dollar cost would be $1,500. The dollar cost can help you determine affordability and compare the cost of your loan to your expected ROI. Having a professional calculate your loan costs will help you properly plan monthly payments and keep your finances in check.