Are you trying to get a loan to finance your business from banks, but is having difficulty in getting your loan finance approved? When it comes to loan financing, there are many key questions business owners want answered. Questions such as, what do lenders expect? How can I prepare loan request the right way so that the approval process will be shortened? What are they looking for? With this brief loan financing guide, hopefully it will help answer some of the questions.
Most businesses, especially small businesses, need start-up capital to finance its operation. Most banks and finance institutions offer business loan finance. Most of these banks and finance institutions would want to lend to companies that are profitable and are able to generate substantial cash flow to continue its operation and repay the loan. The company and the owner must have good credit standing, and must not be a bankrupt, or an un-discharged bankrupt.
Another loan financing guide tip: Banks and finance institutions usually do not qualify most start-ups, unless the owner has personal net worth, income, or home mortgage to guarantee the loan. In this case, the owner has to personally guarantee the business loan. He has to declare and pledge all of his assets. This means that in the event the company cannot pay back the loan, the banks will take his assets as loan repayment. This might mean if the owner pledges his house as a mortgage, and the company cannot fulfill the loan, banks can sell his house to repay the loan. That means he will have no house to stay! This is an important point to take note of. Business owners have to provide financial statements for both the company and himself for past years and tax returns.
Another loan financing guide tip: Searching for a bank loan takes time. Start finding a loan a few months before your company needs financing. An interesting point to note is the bank needs your business actually. Do not approach this whole loan financing desperately, and do not think that you are in the mercy of the banks. The truth is banks actually need your company to borrow from them to earn money. So take your time in searching for a bank loan.
Be prepared to give a detailed cash flow forecasts to the banks and finance institutions. The banks may ask for a business profile of your company to help them to better understand your business. By doing this, you are showing the banker that you are able to pay him back, and getting loan financing will be much easier.