Things your business will need to obtain financing

Small business owners need to understand that they will need a great deal of preparation, before approaching their lender, for a loan. This preparation covers several different aspects of a business' finances. The bottom line is that if you plan on approaching a bank or other traditional lender, for a small business loan, to get your business up and running or to expand your business, you will need to make sure that your business meets certain requirements. Here are the things your business will need to obtain financing-

• Credit score-The first thing that you and your business will need, in order to obtain financing from a bank or other lender, is a very good credit score. This can especially be a problem if your business is just starting out. There is a very good chance that your business will not have very good credit, if it even has any credit. If this is the case for you then lender will be looking closely at your personal credit worthiness as an indicator, of your ability to repay a loan. The bottom line is that if you plan to start a business, or need money to expand your small business, in order to get a business loan, you will need to have a good personal credit score. Credit scores are an especially important requirement if you are applying for a SBA loan.
• Cash flow projection-You will need to have an accurate cash flow projection for you business. Your loan officer will want to see that you will have the resources necessary to repay the loan. Your cash flow projection will need to show when your business can expect to turn the income into cash. It should also show when your expenses must be paid. Most lenders will want you to provide a cash flow projection that is broken down to a monthly basis, for the first year after the loan is made. Keep in mind that when applying for a loan for a start up business, you will be making a cash flow projection, based on certain assumptions, such as how much income you expect to make, and what expenses you will have. It is important to understand that you will need to document all of the assumptions; you have made for your estimates, and provide that information with your loan application. The lender will want hard and fast numbers and not vague guesses.
• Capital-You will need to be able to show the banks that you are not relying totally on somebody else to fund your business. Your potential lender will want to see that you have invested a reasonable amount of capital, into your business. Keep in mind that when it comes to investing capital, you can invest cash, or you can invest assets that your business can use, for operating. If you will be investing assets you will need make sure that, you have receipts or invoice that, prove what the assets are worth. You should also keep in mind that when you are applying, for a loan there will be an examination of your debt-to-worth ratio. This will be done so that you can get a basic understanding of how much money you are asking to borrow, compared to how much you already have invested in the company.
• Collateral-This is usually required when applying for a loan, especially if your business has any assets that are worth a large amount of money. Keep in mind that if collateral is the only requirement that your business is missing, it can be overlooked, but that is going to depend on the bank's policies. You should understand that when coming up with collateral to use for the business loan you can use business assets, or personal assets. However, you need to remember that if you default on the loan, you will lose your assets.