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Creative
and Professional Web Site Design for Small Businesses
and Individuals
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Applying
for a Business Loan
The process of applying for a business loan is a stringent
one as compared to the standard procedures in obtaining a
home mortgage loan or a personal loan. This is probably due
to the fact that business loans contain a greater risk element
as compared to other loans. Therefore, lenders need to exercise
greater caution and emphasis when evaluating business loan
applications in order to minimize their risk exposure.
With that, lenders evaluate their applicants based on the
information that are provided as well as their judgment of
the viability and profitability of the business being financed.
Thus, business loan applicants will be required to submit
a loan proposal along with their applications with the purpose
of creating a positive impression upon the lender.
The first element of a loan proposal is an executive summary,
providing short descriptions of the type of business and the
industry, the purpose and usage of the loan, the proposed
repayment conditions as well as the intended loan period.
After that, the company information is provided, enriching
the reader with the nature of the business, the location of
the business, company history, the products or services provided,
key differentiation factors of the company or the product,
the general growth of the industry, competitive information,
growth potential and target customers.
It would help if you could include your company marketing
strategy, detailed product information, historical information
as well as projected growth plans for the company. Apart from
that, if you plan to incorporate product or service extensions
in the future, you should provide these descriptions within
your loan proposal. If possible, geographical expansion plans
will help in the proposal.
The next area that needs to be showcased in the proposal
would be the credentials and experience of each member of
the management team. Impressive credentials will provide assurance
to the lender that the company is managed by individuals who
are responsible and capable. This is important as having the
wrong people managing the company could be detrimental for
the business.
In any loan application, historical records are essential
to be used in evaluating the performance of a company. As
new companies do not yet have these records, the financial
records of the owners will be used as the basis of evaluation.
Income tax returns forms are also required by lenders. All
of these records provided should be the latest copies less
than 90 days old, with the exception of the income tax returns
form.
If the loan is applied for an existing company in active
operations, company financial statements, including profit
and loss accounts, balance sheets and the net worth reconciliation
record should be included in the loan proposal. Again, all
of this information should also be the latest and less than
90 days old. Additionally, a listing of accounts receivables
and other short term and long term debt should be attached.
On the other hand, if the loan application is submitted for
a new business, a pro-forma balance sheet and profit and loss
account should be provided. Apart from that, a cash flow projection
for the upcoming year is drafted to indicate the possibility
of recovering the debt. This also means that projected revenue,
profits, costs incurred and expenditure should be listed out
with definite explanations provided as well as a list of assumptions.
If you possess assets that you wish to use as collateral
for your loan, details for this should be provided to the
lender as well. It is often common for lenders to request
for dual sources of repayment in the event that one source
is defaulted. This means that if the business owner defaults
on his repayments, the collateral can be sold in order to
recover debt.
Finally, other documents normally required for a loan application
would be items like the article of incorporation, lease agreements,
partnership agreements, license, references, etc. As the list
of required documentation, information and attachments differs
between lenders, it is best to check with the individual lender
on their specific information and documents required to be
attached with the loan proposal.
About the author:
Matt Bacak, The Powerful Promoter and Entrepreneur Magazine
e-Biz radio show host, became a "##1 Best Selling Author"
in just a few short hours. He has helped a number of clients
target his specialty, opt-in email direct marketing systems.
The Powerful Promoter is not only a sought-after internet
marketer but has also marketed for some of the world's top
experts whose reputations would shrivel if their followers
ever found out someone else coached them on their online marketing
strategies. For more information, visit Bacak's site at http://www.powerfulpromoter.com
or sign up for his Powerful Promoting Tips at http://www.promotingtips.com
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