What Are the Most Common Business Loan Interview Questions and Answers?

Getting a loan can be a hustle sometimes. But, in my experience as a business developer, I realized how ready you are for the loan that matters. Much as your bank statement may qualify you to get a loan, there are questions you will be asked in a loan interview that may make or break the deal. For that reason, you should get yourself ready early enough to qualify for that sme loan. Below are some of the questions you should expect and how you could answer them.

USDA business loans

Do you own or rent your building?

This question often comes up during an initial conversation with a loan officer. Oftentimes, a business will borrow money to start a new location. The lender will want to know how much of the risk will be shifted to the owner.

What type of business are you involved with?

A business involved with just one product is going to be considered a local type of business. Lenders look towards a local presence when it comes to a company that does several different products. However, suppose a person has a product line that spans several other products. In that case, they will be more likely to get the type of lending solution they need.

Why should we give your business a loan?

Well, this is a critical question. That is why you need to be assertive and conservative at the same time when giving your answer. I suppose you already explained why your enterprise needs a loan in your application. When answering this question, ensure your response is consistent with the reason you provided in your application.

The only difference is in detail you provide. In your application, you probably gave a very detailed explanation. In a loan interview, you should briefly describe the same unless you are asked more questions. Perhaps you could state it is for scaling purposes or payment of staff salary etc. Confidence is key in your expression.

How much time will you use to repay the loan?

When a lender is considering a business as a loan application, they are also interested in a business owner’s ability to repay a loan. This is why there is an emphasis on being local. If a business has been in operation for several years, it is considered a stable and reliable company. This is why the lender may choose to look at the credit history and current structure of a business before determining the amount of a loan that will be given out. The amount of the loan will be based on what is the most common business loan interview answer.

As long as you do not default on your repayments, lenders don’t mind if you stay long with their money. After all, interest is based on the time, amount, and rate of the loan. Therefore, the more time you keep the money, the higher the interest you pay. It is a significant gain for them.

Answer this question according to the time your business needs to repay the money. All the lender wants is the reassurance that you won’t default with repayments like A1 Credit.

Tell us something about your Credit

This is a common question brought about by lenders. Your personal credit decisions affect those of your business. Suppose you have defaulted before as an individual. In that case, there’s a likelihood you could make the same decision when it comes to your business. Ensure you only give the positives. This is not to mean you should lie about your record if you have a negative one. The goal is to avoid mentioning things that could make the lenders reconsider giving you sme loans to grow your business. Keep in mind they have all the tools to check your credit records. Therefore, lying also reduces your chances of getting a loan.

A person’s net worth can also play a part in where they receive a business loan interview answer. Those who have large personal savings may not be able to provide a great amount of money for a startup business. However, the small business owner may be able to provide the lender with a large enough down payment so that it will be easy for them to repay the loan. This is why it is important for someone who is applying for this type of financing to have a solid idea about how much money they need to borrow.

Do you have any insurance? If you do, which ones do you have?

You should always expect this question. To give a reliable and effective answer, you should carry all the insurance documents you have. Sharing the documents could answer the question for you. You could include a few words for the sake of courtesy.

What happens in the case where you have no insurance? Well, this could work against you, but you could still think outside the box. Perhaps you could state you are in the process of acquiring one. Or just think of a positive answer. Ensure you have insurance before getting to this stage to avoid stumbling.

We’ve noted some past failures with your business; would you mind explaining?

The first thing to do is to acknowledge the failures and take full responsibility. This will give an impression of responsibility. But that is not enough, you should provide details of what happened and the steps you took to sort out the issue. You should go ahead and explain the processes you’ve put in place to avoid such failures in the future.

In the business space, it may not be possible to avoid failures. That does not mean your business is set to fail. As long as you have the strength to fight back up, your enterprise may be deemed fit to acquire the loan you are interviewing for.

Conclusion

Business loan interviews can be hard to answer sometimes, especially if you’re just a small business. The queries can be more challenging when you do not prepare enough for them. That is why you need to be ready before meeting the interviewing panel. Remember, through this interview, the final decisions to give you a loan will be made. 

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.