Depending on the lending institutions, there are different approaches used to determine whether we are viable loan candidates. Regardless of the requirements, preparation is key. With enough researches, we should be able to determine the kind of documentation needed for our situation. We should have an increased chance of acquiring the funds we are seeking by providing enough information.
- Business plan: A plan is essential for new business and those that lack one plan could risk getting ignored by lenders and investors. Our official plan should include the important facts about our business, as well as financial projections. For this reason, we should be well versed to our own business. Good entrepreneurs can hold an intelligent discussion about their venture and this should demonstrate their commitments.
- Loan request: It is important to define why we require specific loan and this requires a specific description. Lenders should be informed about why we need to obtain specific type of loan and why the amount could serve our business. There should be a clear outline that provides more detailed explained how the funds will be used for our business.
- Collateral: Business owners should be able to explain what kind of collaterals that we can offer. Collaterals may include equities, equipment, accounts receivable, inventory and real estate. By offering compelling collateral, lenders can have a bigger sense of confidence.
- Financial statements: We should prepare our business statements for recent years and they should be considered as the complete financial statements. Lenders should be able to assess risks associated with lending their money to our business. We should provide details like operating statements and balance sheets. This will give lenders a more complete picture of our company. If we are new t the lending process, we should be aware that projected cash flow statements are generally important. This should be a good opportunity for us highlight and interject previous positive goals and gains our company have met. We should be aware that we are being analyzed during the approval process and it equals to selling our business and ourselves to the lender.
- Personal Financial Statements: Business owners should also provide their personal financial statements, because small businesses could be significantly affected by the lifestyle of their owners. We should also provide the statements of partners and other personal information, such as tax returns, payment habits, liabilities and more importantly, assets. Our personal financial history can be positively or negatively affected by our previous loans. That’s the reason we should always monitor our credit score to make sure we can tidy up any past mistake. We may think that we will have clean credit report if we pay bills on time and take care of our finances. However, something may quietly slip through and ruin our credibility. Misdirected bills can be caused our relocations to new city and this unexpected mistake could cause problems. Many people are also affected by identity theft that can ruin their credit report.
