Apply for Business Loan

By: EconomyWatch Content   Date: 1 December 2009

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When you apply for a business loan, you need to have a thorough understanding of your financials and prepare an effective statement of purpose. Most business owners prepare an executive summary of their business, explaining their business background, terms of repayment and the nature of their business. So, while making a loan proposal, you must take proper care to include industry specific details so that the loan executives can understand how your particular business is run and what industry trends affect it.

The following items should be included in your proposal to make a lasting impact on the concerned people:

·        Description of business

·        Management biography

·        Financial statements of principal owners

·        Loan repayment methods

·        Existing business

·        Proposed business

·        Projections

·        Collaterals

Apply for a Business Loan: Steps involved

The various steps involving in applying for a business loan include:

·        Determine the purpose for which you need the loan

·        Decide the type of loan and whether you want it from a bank, the Small Business Administration (SBA), or any other lender.

·        Update your business balance sheet and clearly mention your company’s assets, liabilities and equity.

·        Update your P&L statement, along with a summary covering your company's expenses, revenues and costs for a particular accounting period.

·        Contact various lenders, either in person, on the phone or via e-mail

·        Consult a financial expert to assist you in reviewing various loan documents and also interpreting the terms and conditions of the loan

Apply for a Business Loan: Mistakes to avoid

Some common mistakes made while applying for a loan are:

·        Not having a clear understand of your credit rating

·        Not reading the terms and conditions before signing

·        Not locking in the rate of interest in anticipation of a relatively low rate

·        Failing to explain your statement of purpose

·        Making significant changes to your business structure

·        Applying only to one lender while overlooking others and various credit unions

·        Not having your financials properly updated

·        Failing to list any equity in the loan proposal

·        Failing to list any collateral

·        Not having a well thought out business plan


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