Preparations For A Small Business Loan
If you are contemplating on applying for a small business loan but unsure of what to prepare, let me help you out. Loan application process generally do not differ amongst providers. It is better then for you to focus on the requirements that will be asked of you especially since your loan approval depends on these.
Business Plan – A business plan is your creditor’s guide to knowing you and your business more. Through the business plan, the provider gets an idea on why you are applying for a loan and how you are going to use the funds. In a way, the business plan substantiates your loan application.
Cash Flow Projections It is quite obvious why cash flows projections are asked for. Lenders need to know of your capacity to settle the loan. The cash flow projections serve as a good basis to determine one’s repayment ability.
3) Personal Financial Status Though it is your business asking for a loan, your personal financial status is still of interest to the loan provider. Why? For a couple of reasons. First, lenders need to know if the owner of the business is personally financially stable. If so, this adds credibility to the loan application. Second, through this report, creditors could determine if the loan applied for will indeed be used in the business (or if the loan is in danger of misappropriation).
Past Business Tax Returns – These documents are not usually asked for. But they may help in establishing your business’ credibility. By showing your past business tax returns, creditors get a glimpse of your business’ performance in the past.
Credit Rating Report First you get a credit rating by buying things on credit and paying back the money you owe. Make sure then that your credit rating report is favorable for you. If your credit rating needs some sprucing up, here are some tips for you.
One of the bases for credit score is the length of credit history. Because of this, it is best then that you keep transacting with your oldest credit provider. This could be done by continuously using your old card even through just small purchases every few months. In this way, credit bureaus will see that you are still in good standing with the original issuers. Most dormant cards are not reported to credit bureaus and this will have an adverse effect on you if remained unused. You could also give your credit rating that needed boost by simply ensuring that your credit limit is made known. Some cards are not reporting the spending limit. In the process, the amount in your bill is automatically assumed then to be your credit limit and it is concluded that you are maxing out your card every month. Either ask your provider to report your limit or lower your balance than what you normally keep it at.
If you are eyeing a loan, don’t forget to check out first Jeff Jackson’s article on preparations for small business loans for an approved your loan application.