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Mark L. Goldberg
Banks typically approve less than 15% of requested loans. However, as a small business owner, bank loans are usually the most reliable source of information. What actions can I take to prepare for my loan to maximize my chances of being accepted?
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ND SBA District Director Alan Haut advises that there are four things that need to be clearly addressed before you start writing your proposal. (1) How much money is required? (2) How will the money be used? (3) How will the funds be repaid? (4) What if the business fails to repay the loan? ?
Tips to get started:
Build and maintain good credit ratings Reliability is the number one thing lenders look for. And your credit rating is a measure of your credibility. Most of all, lenders want to know if a loan will be repaid, and a credit rating is a measure of past history of bill payments.
organize. Organize your finances and keep all your documents (income, expenses, assets, liabilities) up to date. It helps both the borrower and the potential lender to have all the documents ready when submitting the application, rather than having to hunt for specific documents during the review period.
Run a cash flow forecast. Once you have determined how much funding you need, the next step is to determine if you can afford it. How? By making a cash flow forecast. If the amount of cash flow is not sufficient, the requested amount may need to be adjusted. The past history of the business determines the validity and reality of the predictions. Doing this exercise before applying for a lender will give you a sense of the reality of your request.
Know the type of loan you need. Before applying, you should check the different types of loans available.
Term loan: This is a classic loan option. A term loan provides a lump sum payment of cash to be repaid periodically (with interest) until the borrowed funds are fully repaid.
Short term loan: Short-term loans are like term loans, faster and more expensive. The interest rate will be higher and the repayment period will be shorter, but the money will be credited to the bank sooner.
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Business Line of Credit: A line of business is a revolving line of credit with access to ongoing capital. With your credit limit, you only pay interest on the portion you borrow. Once you repay the borrowed funds, you will have access to capital again. No need to reapply.
Business credit card: A business credit card works much like a personal credit card. Buy now and pay later with your credit card. A great way to expand your available capital and build your credit score.
Merchant Cash Advance: Trade tomorrow’s earnings for today’s cash with Merchant Cash Advance. Your lender will provide a lump sum to be repaid at a percentage of your daily turnover.
SBA 7(a) loans: The Small Business Administration (SBA) 7(a) loan is one of the most popular business loans. They have large loans, competitive interest rates, and generous repayment terms. They’re notoriously difficult to qualify for and have a lot of paperwork, but they’re the best.
You can find small business financing.
Accounts Receivable Financing: Accounts receivable financing (also known as factoring) allows you to quickly turn outstanding invoices into cash. If you need extra money to cover a recession or pay your own bills, factoring can finance all you need.
Keep your business plan up to date. Lenders want to know where the funds will be spent and what is the overall plan for the business. They want to know how the loan will help their business and whether management has the ability to manage the business and pay off the loan. That is the role of the business plan in loan analysis. Not all lenders will need a business plan, but it is recommended that you at least have a Business Model Canvas Plan (www.strategyzer.com) to demonstrate that the company’s direction has been considered up front. To do.
Contributed by Mark L. Goldberg, Certified Mentor, SCORE Cape Cod and Islands, www.capecod.score.org, capecodscore@verizon.net, 508/775-4884.
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