Access to capital is an ongoing need for business owners. When you are in the startup stage of a small business, you're likely to rely on personal savings and credit cards to provide the cash your business needs. But as your business becomes more established and starts to grow, or if you're purchasing a business, you may need a business loan.
How successful you are at getting the loan will depend on a number of factors including the business income and credit record, your business plan, the nature of the business, your industry, the business experience of the owner(s), the personal credit of the owner(s) and the lender's estimate of your ability to repay the loan on time.
To evaluate those factors, your lender will ask you to complete a loan application and provide a variety of information and documentation. Although the specifics will vary from one lender to another, you may need to provide some or all of the following:
Loan request details:
• Why you want the loan
• How much you need
• How the money will be used
• Amount of time needed to repay the loan
• What other business debts you have
Business Plan
This would include a description of the business, description of the products and services, marketing projections (and how you plan to achieve your goals), resumes of the principals in the business, and financial projections
Legal Documents
Business licenses, incorporation documents, patents, commercial leases, franchise agreements, or other legal documents related to your business.
Financial Statements
Profit and Loss Statement (also called an Income Statement) for an existing business
Accounts receivables and payables reports (for existing business)
Tax Returns
Both business and personal tax returns from the last three years may be required.
Credit Reports
The lender may require credit reports both for the business (if it's already established) and personal credit reports for the owner(s).
Collateral
Collateral is something of value that can be used to repay the loan if the business defaults on the payments. That something of value would be something the lender would be able to sell to recoup its losses if the business can't pay off the loan. The "something" might be inventory, equipment, bank accounts, or even your home.
Gathering all of the above information and documents before you approach a lender, will help you speed the loan application process. It should also help you get a clearer vision of your business needs and the businesses' ability to repay the loan.
Copyright © 2009 Attard Communications, Inc.
May not be copied, reprinted, or reproduced without express permission from Attard Communications, Inc.
