Given the tightening credit market, what can I do to increase my chances of getting a business loan?Banks are implementing more stringent requirements from their borrowers. To successfully obtain financing, you must be thoroughly prepared.
In addition to providing your business plan, financial record and credit history, here are five questions you must answer:
•How much money do you need?
Be specific. This should not be determined like a home mortgage calculator, where you plug in household incomes and it generates an amount for which you “qualify.” A business loan is intended for a specific purpose. Do the number crunching ahead of time to determine the amount you need.
•What will you do with the money?
Share your vision. Then be specific regarding exactly where the dollars will be spent to achieve those objectives. Show specifically how your revenues, expenses, profitability and cash flow will be affected by these changes. Provide evidence or research you have to support these claims.
•How will you pay the money back?
This is probably the most important question of all. Many businesses assume the loan payments will come out of future profits. However, depending on your industry and business cycle, profitability may not accurately reflect cash flow. If you hold significant inventory or accounts receivables, you may not be able to access this income as cash to make loan payments. Make sure your plan anticipates having the cash on hand at the time the loan payments are due.
•When will you pay the money back?
Is your ability to repay the loan contingent on a certain event? Are you in a financial position to begin making payments immediately?
•What will you do if something goes wrong?
You don’t necessarily have to document this in writing, but you must be prepared to answer this question — both for the banker and for yourself. Answer these questions before you meet with your banker. Make sure you set clear and realistic expectations for your business regarding the use and repayment of the loan. When reviewing your answers, ask yourself, “Would I loan money to this person?”
Source:http://www.kansascity.com/business/story/873115.html
