A wise woman once said that you can’t really prosper in business without the help of others. In that saying, she did not necessarily mean the customers or workers that help the business to progress. She was pointing to business loans offered by various banks and companies. Quite different from personal loans, business loans are solely for the purpose of starting or improving a business. Those that give this type of loan know very well that business and entrepreneurship is the way forward. In light of that, they encourage those who need such a loan to apply for it.
Components looked for before a Business Loan is approved
Before a small business loan in Australia or any kind of loan is given out, there some few things the lender needs from the borrower. When it comes to business, the amount being borrowed is not little therefore word of mouth cannot serve as surety that it will be paid back. The 3 main constituents are:
Credit History of the Borrower
Whether you’ve come as a business or person to apply for the loan, the bank or company offering the loan will need your credit information. For those who go in the name of the business have to produce a list of the shareholders and their credit history. If one of them has a low credit score, then chances of the business loan being approved drop drastically. This means that you need to have this information handy. However, before presenting this information ensure there are no mistakes. Sometimes credit companies can make mistakes while preparing credit reports.
When applying for a new business loan, a requirement is the applicant’s income report or the business’s income in terms of profits, or both. In most cases, they’ll want to know the income of shareholders to know if the loan can be repaid without any problems. The lending company will evaluate the income statements and compare this with the amount being applied for. In light of this, if the amount you apply for is way above what you earn, then your business loan is more likely to be rejected. Make a wise decision when it comes to the amount applied for.
Collateral or Security
This serves the purpose of being used to pay back the loan in the event that you cannot pay the business loan. This is not to say that you won’t pay the loan. It’s a means for the bank or company to be absolutely sure that the money they lend will be paid back. Collateral comes in different forms; Real estate, equipment and assets, receivables, and inventory. Depending on the amount requested, the collateral will respond in value.
Another of the things that should be added but not majorly is a business proposal. This will be applicable to those in want of starting a business. The bank or company knowing how you’ll spend the money can only be a plus for you.
Questions to ask yourself
These are questions that you ask yourself before applying for the loan and the answers will help you know what you need in terms of the amount to request.