Monday, September 21, 2009

9 Tips To Maximize Your Chances Of Obtaining A Small Business Loan

To get approval for your small business loan application requires that you meet the lending criteria set down by the lender. Some business operations are more risk averse than others, and will therefore have more stringent criteria.
To vastly increase your chances of a successful funding application, you will need to present the following information:
  • The reason for the loan must be clearly stated. The lender will be looking for information on activities that fits within the normal range and expertise of your business. The amount you need may cover a number of items, so you will need to cover each.
  • The amount required, and the repayment term of the small business loan you want. For example, $50,000 term 5 years, payable quarterly.
  • Details of how you will repay the amount borrowed. For example, from the increase in profits, reduced operating costs, or from the sales of a new product.
  • Details of security you will be able to offer to the lender. This will act as reassurance for the lender. If you’re not prepared to put up some form of security to share in the business risk, then why should they?
  • You will need to include your business plan, which will aim at answering essential questions relating to management capabilities, information about the market you operate in, the future prospects of your line of business, etc.
  • A minimum of 3 Years financial statements. You will need to present quality financial information from your accounting software, preferably signed off by your accountant or tax adviser.
  • Latest Set of Management accounts. Again produced from your accounting software.
  • Accounts receivables (debtors) and payables (creditors) past reports. This requirement applies to businesses, which have been in operation for more than three years.
  • Financial statements of the owners of the business – particularly required if some form of security is necessary to back the loan.
If you have a new business, the emphasis is going to be on your business plan, and the security or collateral you can provide against the loan. You must take the time to practice presenting your case to the lender to iron out any glitches. Practice on your colleagues or financial consultant letting them to ask the questions the lender may ask.

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