Loan Tips for New Entrepreneurs
In order to negotiate and get approved for a small or start-up business loan, an entrepreneur must be able to think like a banker. The business owner must provide information in a brief yet logical manner that answers the queries of lenders, even before these questions are asked.
If you are really interested to get a small or start-up business loan, it is very useful to have an excellent understanding of the four phases of analysis used in the loan request process. What are these four distinct phases? And what is actually involved in each phase? Let us discuss the answers for the questions in the next portion of this article.
Four Phases Analysis in the Loan Request Process
1.Loan Purpose Analysis. In this phase the business owner must determine the specifics of his small business loan request. He needs to carefully consider what the purpose of the loan will be. Does he need the proceeds of the small business loan to successfully start a business? Or does he need the credit account to address a certain business need?
Aside from identifying the purpose of the loan, the borrower must also determine how much cash he needs to borrow. This is a vital piece of information that credit applicants must prepare before they approach any lender or credit organization. To come up with a good estimate, an entrepreneur must devise a clear business plan that details all the aspects of the business that he plans to set up or the business project that he wants to finance. By understanding and listing down the costs that will be incurred in the business venture, the entrepreneur will be able to come up with a close estimate that he can request from his chosen lender.
2.Repayment Source Analysis. The next question that a business owner must consider is this: How do I intend to pay back the small business loan that I will be requesting from a credit company or bank? To answer this question the borrower must look into the financial situation of his current or target business. He needs to consider whether or not the business will be able to generate sufficient profits that will allow it to pay off completely whatever credit lines it will be taking from different lenders. But how can the business owner do this?
Well, he must come up with cash flow projections that will indicate the long-term profitability of his business. By coming up with a realistic forecast, he can successfully convince his prospective lender to grant his request for a credit account. This way, he can have ample sums of cash to establish his commercial enterprise or to fund an immediate business need.
3.Loan Structure Analysis. In this phase of the loan request process, the business owner considers the terms and conditions of the small business loan he intends to apply for. He looks closely at the rates of interest, the fees he needs to pay, the deposit requirements he needs to provide and even the payment arrangement and schedule that he needs to observe in relation to his small or start-up business loan. This way, he can find and apply for the small business loan that will surely suit the financial capability of the his business.
4.Loan Management Analysis. Once your loan has been funded, the next thing you need to do is to make sure that you provide your lender sufficient information that will allow it to monitor the status of your credit account. Always supply your lender with quarterly financial statements as well as insights on the performance of your business. This way you can establish a positive relationship with your chosen lender.
We encourage you to use the information we have presented above. In so doing you can thoroughly prepare for your business appointment with your lender and soon enough you can get approved for the start-up or small business loan you will be applying for.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2010.
Related Article: Borrowing Money To Build Your Business
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