How to Get a Business Loan

By: EconomyWatch Content   Date: 23 December 2009

About The Author

EconomyWatch Content

Follow The Money

EconomyWatch, Content Team

 

  • Dot Div
  •      

If you are starting a business or planning to expand it, it is necessary to know everything about how to get a business loan. Securing a business loan involves a lot of paperwork. So, it is essential that your loan application stands out from others. To increase the odds of getting the loan, follow the five “Cs” of credit.

 

How to Get a Business Loan: 5 Cs of Credit

 

 

·        Character: This includes your reputation, personal history and relationship with the lender.

·        Capacity: This includes your asset and liability structure, cash flow capabilities, and net worth.

·        Collateral: This includes your assets as a pledge against the loan from a bank.

·        Capital: Most lenders and financial institutions want to see you having a proper capital structure, with minimal risk exposure.

·        Conditions: Banks assume that you have a thorough understanding of your business industry, the current economic conditions and other related information.

How to Get a Business Loan: Elements of a Complete Loan Application

 

 

·        Be specific about how to use the funds. Formulate your statement of purpose clearly and carefully.

·        Show a well documented, well defined source of cash repayment.

·        Show alternative sources of capital that do not require any collateral.

·        Provide an analysis of collateral throughout the loan term, in terms of value and liquidity.

·        Evaluate all the risk factors and mitigation process of a potential worst case scenario.

·        Provide clear and concise answers to the loan committee’s questions.

How to Get a Business Loan: Business Loan Types

 

 

Start-up financing: If you need to kick-start your venture, select from various start-up financing options offered by different banks and lending institutions. Loan proceeds can be used to purchase equipment and machinery.

Business growth financing: If you already have an established business, but want to see it go to the next level, choose this loan to buy equipment for a bigger and better production process.

Inventory financing: This loan ensures that your business has a regular inventory of products to sell to your customers. Inventory loans can also be used to purchase necessary materials to manage your supplies.

Motor vehicle financing: Choose this loan to answer your venture’s transportation requirements. Most banks provide both vehicle lease and purchase options to their clients.


  • Dot Div
  •      

Most Popular in Business Loans

Related Links
blog comments powered by Disqus