A business loan is one of the most reliable and popular source of funding for many startup businesses. The process of applying for a business loan is daunting at best and requires relentless commitment and hard work. In addition to the loan application process, you are required to prove or demonstrate why your business is viable for the bank’s investment/loan. As such, it is important to identify what lenders are looking for and getting the necessary papers before applying for a business.
Also, before applying for a loan, it is important to analyze both your personal and business credit situations. A negative credit score either personal or for your business can affect your qualifications for a loan. As such, it is always advisable to ensure that you have a written explanation detailing the reasons for the negative score, as well as explaining late payments (if any).
Here is a guide for the factors to look out for when preparing for a business loan.
Part 1 – Preparing a Business Plan for the Loan
1 Prepare a statement of purpose
2 Prepare a description of the business and how it will accrue profits
3 Include a profit and loss statement in the plan
4 Include references and cash flow projections
5 List the business’ owner(s)
6 Include proof of insurance
Part 2 – Preparing your Documents
7 Check that your personal financial statement reflects all your assets
8 Provide your recent personal and business federal tax returns
9 Prepare your recent bank statements (personal and business)
10 Prepare your interim business financial statement
11 Check that your business debt schedule is updated
Part 3 – Reviewing your Finances
12 Analyze your credit report
13 Review your financing options
14 Determine how much funding your business needs
15 Prepare your proof of cash flow
16 Analyze your financial statements
17 Determine what you are likely to afford
Part 4 – Collateral and Equity
18 Analyze your collateral options
19 Determine your equity preparations
20 Prepare your purchase agreements, appraisals, and contracts
Notes:
- When determining your equity contribution, ensure to include a write-up detailing your equity contribution amount and the source of your contribution.
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