a Those are some helpful tips on borrowing money. Borrowing money is one of the most common sources of funding for a small business, but obtaining a loan is not always easy. Before you approach your banker for a loan, is a good idea to understand everything you can about the factors the bank will evaluate when they consider making a loan. Let's begin by exploring some of the key points your banker for revision: repayment capacity / Capacity: The ability to repay must be justified in your loan package. Banks want to see two sources of repayment – cash flow of the company, plus a secondary source, as collateral.
In order to analyze the cash flow of the company, the lender will review past statements of the financial company. In general, banks are more comfortable dealing with a business that has been in existence for several years, since they have a financial record. If the company has made profit and nonprofit that can cover the payment of additional debt, then it is likely that the loan will be approved. However, if the business has been operating slightly and now has a new opportunity to grow or if that company is a start-up, then it is necessary to prepare a thorough loan package with detailed explanation of how to deal with the company will able to repay the loan. Credit History: The first thing a bank will determine when a person applies for a loan business is personal and business credit is good. Therefore, before going to the bank, or even start the process of preparing a loan application, you want to make sure your credit is good. Equity: Financial institutions want to see a certain amount of capital in an enterprise.
Equity can be built into a business through retained earnings or cash injection of either the owner or investors. Most banks want to see that the total liabilities or debt of a company is no more than four times the amount of equity. The business owner usually must put some of his / her own money in the business. The amount a person must be put into the business in order to obtain a loan depends on the type of loan, purpose and terms. Collateral Financial institutions are seeking a second source of payment, which often is collateral. Warranty are personal and business assets that can be sold to repay the loan. Each loan program requires at least some collateral to secure a loan. If a potential borrower has no collateral for a loan, he / she will need someone to secure the loan. Otherwise, it may be difficult to obtain a loan. When you want to borrow money must be prepared to answer these questions: Can the business repay the loan? Can you pay the loan if the business fails? Does the business collect its bills? Does the business control its inventory? Does the business pay your bills? Does the business control expenses? Does the business have a history of profitable operations? Are sales growing? You may freely reprint this article provided the author's biography remains intact: John Mussi is the founder of Direct Online Loans who help homeowners in the UK find the best loans available through the website