How To Get A Business Loan
An applicant for any type of credit, including business loans, needs to fulfill certain criteria at the time of filling a loan application. These pre-requisites vary according to the type of loan required. At times the lenders identify the loan type according to the requirements set by lenders.
Some prerequisites for using the loan will vary from institution to institution. An institution generally sanctions a loan based on two things. One is the reason why the applicant needs a loan and the other is the applicant's ability to pay back the loan. Below are some of the general requirements for a business loan. 1.
Business Plan: This is the first and one of the key documents needed for a loan. The business plan supplies the reason for the loan along with detailed information on what the business owner will do with the loan money. Some key elements of the business plan are the executive summary explaining all the key points of the business plan, the overview of the industry the business falls into, the market analysis, the competitive analysis, and the plan for the marketing, management and operations of the business. The annexure contains all the additional information about the business. The business owner can also attach some valid and key copies of documents from the business that help establish credit worthiness.
2.Cash Flow Projection: The cash flow projection enables the lender to assess the degree of risk associated with loan repayment capability. The loan amount sanctioned may vary according to the loan repayment ability over a particular period of time. A cash flow projection is a document that projects the cash inflow and the cash outflow of the business. This helps assess when to cut down expenditures in order to maintain decent cash position and the statement also helps business owners realize when they have excess cash so they can reinvest it. Through a cash flow projection the business owner learns the magnitude of the capital requirement for their business.
3.Statement of Personal Financial Status: This statement lists all the owners' personal assets. Along with the owners' liabilities it reveals their personal financial status. 4.
Business Tax Returns: If a business is already in operation, then the owners can submit a record of all the past business tax returns along with their application. The lender is able to assess the company's financial condition through these returns. 5.Credit Rating Report: A credit rating report reflects the history of the company's payment of credit. These records are quite crucial as they show if the company paid its credit on time or not and what the magnitude of the loan was. Software For Filing Loan Applications There are many online mortgage and loan application software packages available in the market place today.
Both lender and the borrower can utilize. The online application is generally secure. Software packages exist to facilitate a lender in putting up an online application for their company's site so the borrower can fill an application.
Some software even allows the lender to incorporate the company's custom color and logo on the application form to yield an authentic look to it.
David Gass is President of Business Credit Services, Inc. His company publishes a free weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com
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