Preparing for a Business Loan If you have decided to take out business or commercial loans, then it is important to properly prepare for it, as this will minimise the chances of having your loan application denied. While most start-up entrepreneurs do rely on their savings, others desperately need a financial aid to either start their business, or to expand it further. Here are some of the aspects that you need to consider prior to taking out a business or commercial loan:
1. How Profitable Is Your Business? This is the first and perhaps the most important question that you need to ask yourself, especially if you own a small or medium-sized enterprise. How profitable is your business? Will you afford to repay the loan in the future? Are there any chances that your business will go bankrupt in the next couple of years? Financial statements and any other documentation related to your monthly cash flow can certainly come in handy for forecasting the future of your business.
2. Determine How Much Money You Need Now that you have determined the profitability of your business, the next step you need to take before seeking financial assistance of any kind is assessing your financial situation. Are you in need of more capital? Do you need to take out some money “for the rainy days”, to protect your business against any and all risks? How fast do you need the money? How much money do you need and what average monthly rate can you afford to pay? Is your niche/industry profitable enough for a sustainable long-term business? Is your business cyclical or only seasonal? All these questions are of paramount importance for assessing your overall financial needs and how much of a business or commercial loan you need to take out.
3. Create A Checklist For Your Business Loan Just like any other type of loan, business loans do require some paperwork. That being said, make sure to provide enough personal background information, to attach resumes of the management team (if required by the lender), to attach a personal credit report that will speed up the application process, the income tax returns, the financial statements, bank statements as well as a thorough, detailed business plan that includes the balance sheet, the cash flow as well as the profits and the losses.
4. Come Up With A Back-Up Plan Every professional must have a Plan B, a back-up plan to rely on, should their loan not be granted by the first provider. The golden rule to consider when applying for a business or commercial loan is to always take into account two or more providers – the more, the merrier. Your loan officer may decline your request, and it is important to have a back-up plan to rely on when that happens.
Conclusion Taking out commercial or business loans of any kind can be a daunting and time-consuming task, as you will need to provide a lot of paper and documented proof of your business’ financial situation. Different companies that specialise in business lending in Porirua have different requirements and criteria that applicants must meet in order to be eligible for the loan, so make sure to do your research and have all the documentation at your disposal. Preparation is key!