Before a lender gives you a new loan, they’re going to want to know about all current debts you have (including personal debt in some instances). Provide a list of all current debts, including products like mortgages, credit cards, personal or car loans and lines of credit.
You should also outline:
- Loan terms
- Loan amounts / card limits
- Current balances
- Repayment frequency
- Interest rates
- Special conditions or covenants
- Loan restrictions
You also need to provide some context about the proposed new debt:
- How will it impact on existing operations?
- What will the complete debt profile look like?
- Can the business service both the existing and new debts with enough of a financial buffer to put the lender at ease?
- Has the debt been properly structured to strengthen the overall business and this lending proposal?
Having other debts doesn’t necessarily mean that you can’t get a new business loan, but a lender will most certainly take into consideration your ability to service both the new and existing debts. This will influence whether or not they approve your loan application, so be sure to provide transparent, detailed information about your current and proposed debt position.