Tips to Getting a Business Loan
One of the biggest contributors to the failure of small businesses is lack of capital or even difficult in accessing business loans. Below are some tips which will assist any business owner in getting a business loan.
Demonstrate that your business generates steady cash flow – Cash is still king and is also a key predictor of a business’ health and prospects for the future. By being able to demonstrate you have ample and/or steady cash flow, you are ensuring to potential financiers that you have plenty of money to pay creditors, employees and others on time. Make sure to be clear and show your financier what predictable cash flow you have coming in. Demonstrate this by being ready to provide financials statement, tax returns, and bank statements.
Maintain a manageable debt load – Debt load is the amount of debt that is carried on your balance sheet. You need to be able to demonstrate you can not only handle your current debt load but also the additional debt repayment your proposed financing will cause. If you want to incur the debt for expanding your business be prepared to demonstrate why this additional debt will be beneficial.
Sustain a positive payment history – One of the most important factors for any financier to weigh is a business’ payment history. A financier needs to see that a business has a record of paying down debt, and on time. A financier may have obtained a third party credit report on your business. Ask to see the report to verify that it is accurate. The report may not mention your significant trade partners and other lenders who would provide a good reference, and confirm your good payment history.
Prove business judgement – Potential lenders want to be assured that you anticipate potential challenges and have a plan in place as to how to address these challenges. Furthermore, lenders are also interested to see that you have the management in place necessary to overcome any obstacles that might come your way.
Shop around – Don’t assume your bank or the vendor will offer the best terms. Compare rates, lease terms, fees and options and use only established financing providers.
