|
Capital sources: What the lender wants to see
 Personal
credit record -- Who are you? A credit report will answer
this question for a commercial lender. They want to know about your
ability and willingness to repay, and the first step they'll take
when reviewing your application is to order a copy of the report
on you from at least one of the three major credit bureaus. So,
it's important for you to know the health of your credit in advance.
You can get copies of your credit reports from the credit bureaus
on your own at a cost of $8 each.
Reason for the loan --
You will need to explain two things: the business's financial need
for the money; and how the loan will benefit your company.
Ability to repay -- You
may have heard it said in real estate that the key to successful
property sales is "location, location, location." In borrowing,
success comes down to one thing, as well: "Can you repay?" Any banker
will tell you, this is the acid-test for borrowing. Be prepared
to show that business cash flow will enable you to repay the loan.
Your capital commitment
-- Lenders hesitate to commit to a company in which the owner has
no personal stake. A rule of thumb is that at least a 20 percent
-- many say a 30 percent -- investment needs to come from the owner,
from either personal cash and savings, or equity in the business.
That amount is above and beyond the assets offered as collateral
to secure the loan.
Your collateral -- You
will have to pledge some type of tangible asset in order to obtain
a loan, such as stocks, bonds, certificates of deposits, or property.
If your loan is for the purchase of equipment or real estate, the
property can become the collateral.
Sources: Richard McClintock, commercial
loan officer with the Small Business Administration office, West
Palm Beach, Fla., and the SCORE/SBA "Introduction to Business Planning."
|
