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Applying for a business loan can be a confusing, intimidating process – especially if you’re a first-time business owner or new entrepreneur. It’s a process that can seem especially daunting to entrepreneurs who are Black, Indigenous, or People of Color (BIPOC), as members of these communities have historically lacked access to the finances needed to start a business, which can negatively impact the health of the economy.

“There’s often a perception that there isn’t capital available for these communities,” said Sherry Boudoin, Community Business Lending Officer (NMLS#: 553055) with First Merchants Bank. “In reality, the access is often out there, but you have to know where to get it, and you have to be willing, and, if you’ve never applied for a loan before, you have to have the courage to take that step. The more we know, the more access we have.

“First Merchants Bank is changing the narrative, we want to be a value-added resource to our clients and diverse communities,” she added. “We want to offer and provide capital and financial wellness packages to all of our clients which will help to grow their businesses.”

As with all things, knowledge is power – so, if you’re in need of a loan to jumpstart or grow your business, how do you start?

“Don’t be afraid – come in, make an appointment, sit down with a commercial loan officer, and build that relationship,” Sherry said.

Form a connection

The very first thing you’ll need to do is select a bank and meet with a loan officer.

“I always like to sit down with my clients and start establishing that relationship,” Sherry explained. “I want to know what their mission is, why they got into business – what’s their passion? Banking is, at its core, about building relationships and partnerships; so applying for a loan shouldn’t be an in-and-out experience.”

Your loan officer will become vested in future endeavors, and an advocate for you and your business as you begin, expand, or grow in your journey.

Having a conversation with your loan officer will also help you determine what kind of loan you may qualify for, and what the process of securing capital may look like going forward.

So, what do you need when you apply for a commercial loan?

Retail Business Banking Loan

If you’re requesting a smaller loan or less for your business, a Retail Business Banking Loan may be right for you. A Retail Business Banking Loan (or RBB) is an unsecured loan that typically has a shorter timeline than other commercial loans, so you can get the funds you need for your business, fast.

“I like to call this the fast-track loan,” Sherry joked. “It allows you to access capital quickly, and it goes strictly off credit score – so you don’t need collateral.”

If you’re thinking of applying for a commercial loan, you’ll need to bring a few key pieces of paperwork with you to your appointment with your loan officer.

The first is your business’s SS4 form. This is a state-issued identification form that assigns your business a tax ID number.

“If you go into any bank or institution you’re going to need this form with you,” Sherry said. “I always tell business owners to keep that and keep it close to you, because it will be required on more than one occasion.”

Next, you’ll need to provide one of the following – either a Schedule 4, Schedule C, or K-1 form.

“These forms show a business’s income, that the business is active, and will list all business owners,” Sherry explained. “We want to make sure that, when a loan closes, all owners are present to sign the document.”

Finally, you’ll need to bring your driver’s license – though this may not be required until later on in the loan process.

“The loan process is highly individualized,” Sherry explained. “We may or may not request other documents -- but generally, these three items are going to be what a business owner should have in-hand and prepared when they go to apply for a loan.”

Because it’s an unsecured loan, the process can be very quick – the entire process could take as little as 8-10 business days, from application to closure, Sherry said.

“Our loan officers at First Merchants try to be especially speedy with our commercial clients,” she added. “I really love that we have that dedication to get businesses the capital they need as quickly as possible so they can continue operating their businesses.”

Business Banking Commercial Loan

However, if you’re hoping to secure a larger loan for your business – you may need to go with a Business Banking Commercial (BBC) Loan. However, with a higher loan amount comes more paperwork, a slower timeline, and stricter guidelines.

“It’s because of that higher loan request that we really have to make sure we do our due diligence as a bank,” Sherry explained. “So there’s a deeper dive that’s required into the documentation for cash flow purposes.”

To apply for this type of commercial loan, potential clients should be prepared to bring three years of their business’s tax returns, as well as three years of their own personal tax returns.

You’ll also need to provide a Personal Financial Statement.

“The Personal Financial Statement is really one of the most important pieces,” Sherry explained. “It’s a document that shows a client’s assets and liabilities, and it can be so beneficial because if, for some reason, we can’t do the loan request through the traditional methods there might be something we can pick up on the personal financial statement that we could use to collateralize the loan. It helps us get a good ‘big picture’ of the business owner’s financial status and what they have available to them."

Your loan officer can also ask for a current Profit and Loss statement to show how your business is doing financially year-to-date, as well as an income statement to show your business’s income and expenses.

In some cases, you may need to present an Age Receiving Report, to show what inventory you have coming in.

“For example, if you aren’t approved through traditional means but you have about $200,000 in inventory coming in according to your Receiving Report – that inventory could be used as collateral,” Sherry said.

If you need help pulling documents together, or aren’t sure where to find these items, you can provide your loan officer with a signed authorization for them to reach out to your Certified Public Accountant.

“Your CPA should know where to find those items, or should be able to pull them together,” Sherry said.

Go For It!

Above all, have courage.

“Try to trust that the person you’re working with is going to do what they can to help you get the right amount and help you through the whole process,” Sherry said. “That comes easier once you’ve built that relationship – but try to remember that we are here to help. We want to see you succeed and to help you prosper.”

Want to set up a meeting with one of our attentive commercial lending officers? You can arrange a virtual appointment or visit your local, welcoming banking center.