Business Loan Article
Business loans
serve a variety of needs for both new and established businesses.
You have a wonderful idea
for a new business opportunity, you even have a devoted group
of people who will work for you and have found adequate office
space to start your business. Unfortunately, you are short of
capital with which to pay for salaries, rent, and equipment. You
can always set up your business, using a start up business loan.
For established business,
business loans enable additional cash flows to provide funds for
fresh purchases, making essential payments for payroll and rent
etc. Business loans are also acquired to meet needs of refinancing
money borrowed previously from banks and other financial institutions.
Once you start the loan
application process, banks and other financial institutions become
very interested in your creditworthiness and credit rating, since
this determines how much money they will lend you and how much
interest you will pay on the loans you take. These ratings indicate
whether or not yours is a high risk loan.
How are credit ratings for
consumers compiled? Major credit bureaus, such as TransUnion,
Equifax, and Experian, have information on you, which they collect
to come up with a credit rating. The information with each bureau
may differ. To deal with such a situation, the Fair Isaac Corporation
came up with a uniform credit scoring method called the FICO model.
In this system, your credit report is compared with that of several
million consumers to judge your current credit behavior and predict
your future behavior.
Getting your loan approved
depends upon many factors.
Business Plan:
The business plan clearly defines your plan about borrowed money.
Essentially it contains the following elements:
-
Detailed description
about the nature of your business and its goals
-
Company's legal ownership
-
Other details about
the company like how long the company has been established,
its business assets etc.
-
Details about your company's
products and their pricing
-
Information about your
market, its size, and locations
- Information about your customers' profile
- Information pertaining to your background,
experience, skills and accomplishments
Financial Information:
You will also be requested to provide your financial
information.
Past business tax returns: The lender will also
be interested in your past business tax returns so you will be
required to provide that detail too. The idea behind assessing
your business tax returns is to gauge how sound is your business
and whether you will be in a position to pay back the returns.
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