86 PROFESSIONAL WOMAN'S MULTICULTURAL MAGAZINE WWW.PROFESSIONALWOMANMAG.COM
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egardless of your business type, you're likely to offe!obodjbm!tvqqpsu!up!tvtubjo!zpvs!pqfsbujpot! at some point. This means you'll need to approach different lenders for a business loan to supplement your working capital. Up to 40 percent of busi- ness owners do this every year. Unfortunately, the process of applying for a loan can be pretty frustrating if you don't know what lenders expect from you. Some lenders have specif- ic conditions you must meet to get loan approval. As a borrower, understanding such conditions can save you time and improve your chances of getting a loan.
Personal/business credit score
Before applying for any loan, review your person- al credit score. Lenders use this score to assess your ability to manage or pay debts. Plus, the amount you qualify for depends on your score. If your business has multiple owners, each lender must provide their credit scores. Most lenders prefer to use FICO Scores, which sbohf!gspn!411!up!961/!B!hppe!tdpsf!jt!bozuijoh!gspn! 670 to 739. If you're an established company, you'll need a business credit score from Experian, Equifax or Dun & Bradstreet, and it ranges from 1 to 100. So, the higher, the better.
Essential Small Business Loan Requirements
Business plan
Be sure to have a detailed and precise business plan - some lenders might want to know the pur- pose of the loan and how you plan to use it to increase qsput/!Qmvt-!beejoh!uif!qmbo!up!zpvs!bqqmjdbujpo!ifmqt! make your business stand out from other applicants. Your business plan should detail all the critical business information, such as company description, nbobhfnfou! ufbn-! qspevdu0tfswjdf-! dvssfou! obo- cials, SWOT analysis and marketing/sales strategy. The plan should demonstrate that the requested loan will be adequate to cover your expenses and other loan repayments.
Bank statement & ratings
Lenders usually want to look at your bank state- nfout!up!hbvhf!uif!obodjbm!ifbmui!pg!zpvs!cvtjoftt/! If you're borrowing from your bank, they'll look at your account rating, which represents your borrowing capacity at that bank. Whatever the case, your rating and bank statement must be pretty compelling to qualify for a business loan. For example, if you want a good rating, your average daily balance should be above $10,000 for at least three months. Your bank statement should also show a steady volume of regular account deposits.
Balance sheet
What assets, liabilities and owner equity do you have? These details are essential for lenders to deter- mine your business' worth. So, be sure to get your balance sheet ready before applying for a small busi- ness loan. Keep your liabilities down, especially with credit cards and lines of credit. A good credit card balance should be about 10 percent per account. Still, you can get quick business loan approval if you have assets up!cbdl!zpvs!efcu/!Sfhbsemftt-!ju!ifmqt!up!nbjoubjo!b! convincing balance sheet.
Business cash flow
Zpvs! cvtjoftt! dbti! px! qspwjeft! b! tobqtipu! pg! zpvs!npouimz!obodjbm!qspmf/!Ju!ifmqt!mfoefst!lopx! the amount you take home after paying your business expenses. Consequently, they're able to determine your ability to meet your loan repayment obligations. Ideally, most lenders prefer borrowers with a debt service coverage ratio less than 1.25 or 1.35 times their expenses. So, they'll compare your accounts re- ceivable to accounts payable and review your annual ofu!pqfsbujoh!jodpnf!up!efufsnjof!zpvs!dbti!px/
Collateral or assets
Sfnfncfs!uibu!opu!bmm!mfoefst!xjmm!btl!gps!dpmmbu- fsbm!xifo!zpvsf!bqqmzjoh!gps!b!mpbo/!Ipxfwfs-!jut! vital to get prepared if you apply for a loan that re- quires collateral. For example, SBA 7(a) loans above $25,000 need collateral and a personal guarantee. Such lenders want to see the assets they'll seize should you fail to pay the loan as agreed. The collateral can be equipment, invoices, real es- tate and businesses. Some lenders will even request borrowers pledge personal and business assets to se- cure a loan. Be sure to understand the terms and con- ditions of loans that require collateral - it helps to know if they allow you to claim accounts receivable and other collateral.
Understand the requirements
When learning how to apply for a small business loan, it's vital also to understand the requirements and conditions for such loans. These loans are not hard to get if you have an excellent credit score and sound cvtjoftt!obodjbm!ifbmui/ Ipxfwfs-! TCB! mpbot! qsfgfs! cvtjofttft! uibu! bsf! already making money. So, if you're a startup, it's advisable to try a microloan. Otherwise, be sure to understand the essential business loan requirements of different lenders and get your paperwork ready be- fore applying for any business loan.
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