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In past they looked at our business plan, to make sure it was feasible (that our profit/expense forecast based on numbers we had was in line with what was expected), and looked at the collateral that they could recover if needed from what the loan would be covering, what we bought for the amount
Almost all business loans these days require what is known as a PG (personal guaranty). Unless the company is well established and large.
It wasn't always this way.
IMO this is one of the many problems with our modern day economy. Business credit has never come back, therefore it makes it much more difficult for small businesses to weather the inevitable storms that come with business ownership.
For small businesses there really isn't a "business loan". It may be written in the business name, but its really on the back of the owner(s). Personal guaranty, your credit score and your income tax returns. Banks aren't in business to take risks.
Given the question, I would assume your business is small and/or new. In either case, the answer is yes. Otherwise it would be far too busy to issue debt to a company, pay it all to yourself, and then bankrupt the company. Eventually they could win out, but it's a long messy process.
However, if you had 10 investors and only owned a portion of the company, the company had rules and safeguards...then maybe. Basically the bank has to feel comfortable knowing that...beyond whether or not the business will work...it would be very difficult for the entity to lever up and payout and then runaway from the business.
The reasoning matters quite a bit as well. I need a loan to make my store look more attractive to walk through traffic is very different than I have received a contract from Verizon to build it 3 new towers and will be paid after acceptance. This is a project I have done successfully in the past. Here is their PO, I expect to be out of pocket on this project for 9 months and need a loan for materials and labor to cover the fulfillment and receivable cycle time.
If you apply for a business loan lets say for 50-100k, do they always use your personal credit to check? also do they report your loan to bureaus?
Yes before processing your loan, lenders check your eligibility, credit history, cash flow history and CIBIL score.
Whenever you apply for a loan, lenders want to know if you’ll repay the loan. To figure out, they look at your history of borrowing and its repayment. Credit bureaus have the information that lenders use to make those decisions.Your PAN Card has all the information.
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