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6 Questions Banks Will Ask When Applying for a Business Loan

Small businesses borrow an average of $600 billion every year. 

That money can mean the difference between success and failure for many businesses. 

Applying for a business loan is the first step. But before you can secure a business loan, you’ll have to sit down for an interview with the bank. Loaning any amount of money poses a risk to lenders, so they’ll want to make sure you’re a good candidate for their money. 

You want to prove to the lender that your business is financially stable and able to make the loan payments on time. We’ve put together this guide to help you learn how to make that happen. 

So make sure you keep reading below! 

Five Questions the Bank Will Ask You When Applying for a Business Loan

To convince the bank you’re a good fit for a loan, you should have clear, relevant answers to all their questions. Here’s a quick list of the most important questions you should be ready for during the interview. 

1. Why Do You Need a Loan?

You’ve probably already answered this question in your loan application, but that doesn’t mean you should rush through the answer. Instead, use this time to explain why your business needs money, and what you plan to do with the money when you get it.

2. Can You Summarize Your Business?

Before giving you a loan, the bank will want to know what type of business you have and whether or not it has a market. 

Talk about what makes your business unique from your competitors and don’t forget to highlight your strengths. The lender might also ask to see your business plan so they understand how you plan to grow your business and at what rate. So make sure you have that with you. 

3. Can You Explain Past Business Failures?

If your business has had any past failures, especially related to financials, they might set off red flags for the lender. You have to be able to explain why those happened, how you handled them, and why they won’t happen again. 

The bank might not consider loaning your business any money—no matter how good of a candidate you are now—if you can’t explain your past financial hardships. 

4. Do You Have a History of Accounts Payable and Receivable?

You should always bring your accounts payable and receivable with you to a business loan interview.

This includes things like account-by-account information, sales history, and payment history. For your accounts receivable, you’ll also have to bring credit references. These can be other companies that can vouch for your payment behavior. 

5. What Type of Insurance Do You Have?

Make sure you have your insurance cards with you. Before the interview, you should also make sure your insurance meets any coverage requirements your lender might have.

6. What Is Your Personal Credit Score?

If your business is just starting out, your personal credit score will make a big impact. Your lender will want to make sure you can pay for the loan yourself if your business fails. 

But don’t make your credit score sound better than it is.

The bank will most likely check your credit score on their own. Lying about it won’t help your chances.  

How to Come out on Top of Your Business Loan Interview 

Knowing how to answer those questions will help you prepare for your business loan interview, but if you want to improve your chances of securing that loan even more, there are a few other items you’ll want to bring along. 

Here’s what you’ll need. 

Deep Understanding of Your Business Plan

You can bring your business plan with you on paper, but you should know all the information inside and out. Make sure you can back up your plan with relevant figures and examples, too. 

If you’re a little shaky on your business plan, you can practice a few mock interviews on your own. It might also be helpful to talk to other lenders, like Courtney Sarofim, to get yourself familiar with the interview process. 

Collateral 

Even if you have a perfect personal credit score, you’ll want to prepare some form of collateral to pledge to the bank. This is especially important if your business is a startup. 

This will help reduce the amount of risk for the bank, so they’ll examine your collateral very carefully. 

Relevant Documents 

You’ll need to bring a handful of relevant documents with you to your business loan interview. These include the following: 

  • Accounts payable and receivable 
  • Complete financial statements
  • Insurance information
  • Personal financial information
  • Copies of past tax returns 

These will help back up your statements and prove your business can pay back the loan on time. If you have any other relevant business documents, you should bring them along as well. 

Confidence in Your Business

If you don’t feel confident in your business, the bank definitely won’t.

Even if your business has had some financial struggles in the past, you should talk about your business with confidence. A lender won’t risk their money on someone who doesn’t present their business in a good light. 

Know What to Expect When Applying for a Business Loan

Before you can secure a business loan, you have to make it through the interview process. With this guide, you can prepare for the important questions and make sure you have everything you need to bring along with you. 

Looking for more helpful business advice?

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