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Applying For A Business Loan

The process of applying for a businessIn any loan application, historical
loan is a stringent one as compared torecords are essential to be used in
the standard procedures in obtaining aevaluating the performance of a company.
home mortgage loan or a personal loan.As new companies do not yet have these
This is probably due to the fact thatrecords, the financial records of the
business loans contain a greater riskowners will be used as the basis of
element as compared to other loans.evaluation. Income tax returns forms are
Therefore, lenders need to exercisealso required by lenders. All of these
greater caution and emphasis whenrecords provided should be the latest
evaluating business loan applications incopies less than 90 days old, with the
order to minimize their risk exposure.exception of the income tax returns
With that, lenders evaluate theirform.
applicants based on the information thatIf the loan is applied for an existing
are provided as well as their judgmentcompany in active operations, company
of the viability and profitability offinancial statements, including profit
the business being financed. Thus,and loss accounts, balance sheets and
business loan applicants will bethe net worth reconciliation record
required to submit a loan proposal alongshould be included in the loan proposal.
with their applications with the purposeAgain, all of this information should
of creating a positive impression uponalso be the latest and less than 90 days
the lender.old. Additionally, a listing of accounts
The first element of a loan proposal isreceivables and other short term and
an executive summary, providing shortlong term debt should be attached.
descriptions of the type of business andOn the other hand, if the loan
the industry, the purpose and usage ofapplication is submitted for a new
the loan, the proposed repaymentbusiness, a pro-forma balance sheet and
conditions as well as the intended loanprofit and loss account should be
period. After that, the companyprovided. Apart from that, a cash flow
information is provided, enriching theprojection for the upcoming year is
reader with the nature of the business,drafted to indicate the possibility of
the location of the business, companyrecovering the debt. This also means
history, the products or servicesthat projected revenue, profits, costs
provided, key differentiation factors ofincurred and expenditure should be
the company or the product, the generallisted out with definite explanations
growth of the industry, competitiveprovided as well as a list of
information, growth potential and targetassumptions.
customers.If you possess assets that you wish to
It would help if you could include youruse as collateral for your loan, details
company marketing strategy, detailedfor this should be provided to the
product information, historicallender as well. It is often common for
information as well as projected growthlenders to request for dual sources of
plans for the company. Apart from that,repayment in the event that one source
if you plan to incorporate product oris defaulted. This means that if the
service extensions in the future, youbusiness owner defaults on his
should provide these descriptions withinrepayments, the collateral can be sold
your loan proposal. If possible,in order to recover debt.
geographical expansion plans will helpFinally, other documents normally
in the proposal.required for a loan application would be
The next area that needs to be showcaseditems like the article of incorporation,
in the proposal would be the credentialslease agreements, partnership
and experience of each member of theagreements, license, references, etc. As
management team. Impressive credentialsthe list of required documentation,
will provide assurance to the lenderinformation and attachments differs
that the company is managed bybetween lenders, it is best to check
individuals who are responsible andwith the individual lender on their
capable. This is important as having thespecific information and documents
wrong people managing the company couldrequired to be attached with the loan
be detrimental for the business.proposal.



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