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The Basics of Loan Underwriting

January 03, 20243 min read

Looking to apply for a stock loan? Loans are one of the funding options available to businesses. If you’re applying for one, expect to be subjected to a loan underwriting process.

But what is loan underwriting? What does it involve?

In stock loan financing, the process of loan underwriting requires an underwriter to serve as an intermediary between a lender and a borrower, assessing risk. Simply put, loan underwriting is basically what the lender does to determine if you qualify for a loan or not.

While many borrowers may consider it a waste of time, lenders can’t do without it. After all, they can’t give loans to just anybody! That would be bad for business!

Here’s what you need to know about the loan underwriting process.

Loan Qualification Screening

When applying for a loan, you will be required to provide as much information as possible. This information will include vital details such as your business’ name, contact information, and physical address, as well as financial health.

Providing this information to the lender helps them to get to know you and also initiate the process of determining your eligibility for the loan you have applied for.

The lender might perform a background check to look up your financial and commercial records.

Compiling the Necessary Documents

Thanks to the advances in information and communications technology, you can now apply for a loan remotely – from the comfort of your home or office.

However, you will still have to complete and submit the required documents just like with the manual loan application process.

The required documents and document form (hard or soft copy) may vary from lender to lender, so it is important to find out the exact documents and document form required by a particular lender before submitting your loan application.

Depending on the type of loan you are applying for, lenders may ask for the following documents:

  • A credit report

  • Copy of your driving license/identification card

  • Bank statements

  • Ownership proof (If you are applying for a business loan)

  • Tax returns report (Both for business and personal loans)

Responding to Your Underwriting Request

Lenders will want to be sure that the information you have provided is accurate. If anything isn’t clear, you will be served with follow-up requests. This is meant to clarify the accuracy of the information provided.

This process can be quite frustrating for many people. However, you should clear up everything with the lender. Follow-up requests don’t mean that your loan application has already been denied. It simply indicates that the lender would like further insight into the information you have provided.

If anything, it is a sign that your loan candidacy is still valid. Always stay positive through the process.

Final Thoughts on the Underwriting Process

It goes without saying that the loan underwriting process can be complicated. It’s for this reason that loan experts are there to help you through each step. You will get invaluable assistance throughout the process. This will go a long way in ensuring that you secure the loan you need.

Contact us for more information about stock loans.

David

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