Self-Assessment Checklist for a Small Business Loan
A Home Business Article Contributed by Cassandra L. Keller
Self-Assessment Checklist for a Small Business Loan
If you need a small business loan, there are a few factors you might want to review prior to seeking financing. These factors improve your ability to gain loan approval.
Review Your Personal Finances before Seeking a Small Business Loan
Before you walk into a bank seeking capital for you venture, ask yourself some questions about your personal finances. Do you have a good credit history? Good credit history is one of the most important factors in identifying borrowers that will repay their loans. If your credit report does look that impressive, you might want to improve it a little prior to applying for a small business loan.
Another important personal factor revolves around your taxes. Have you filed all of your income tax returns? Most lenders and government loan programs will check to make sure you have met all you tax obligations before granting a loan.
Review Your Business Finances before Seeking a Small Business Loan
As with your personal finances, the lender will also consider you business finances.
Will your business be able to repay the loan you are seeking? Does it have a positive net worth? Is it carrying too much debt? These are all questions to consider.
Lastly, Review Yourself, Your Business and Small Business Loan Components
After taking a look at your personal and business finances, now it is time to business the interaction between the two.
Do you have enough of your own money invested in the business? Lenders will require that you put up some of your own money in the business. This shows the owner believes in the business enough to take a personal risk with their own cash.
Depending on the type of loan you are seeking this could mean 10 to 30 percent in owner equity will have to be put down prior to approval. Regardless, the more equity you have in your business, the more favorable it is to loan approval.
Along with investing your own money, you will need to have collateral to secure a small business loan. Personal and business assets can both be considered collateral. Collateral is a way to repay the loan in the venture fails. In general, collateral is valued at an amount less than face value. This is based on numerous factors.
Another issue to consider is are you willing to guarantee the loan yourself? In order to obtain their initial business loan, most owners are asked for a personal guarantee.
A lender is also going to take a look inside the operation of your business. They will want to know if you have qualified managers and advisers and if you have any personal experience running a business.
If you don't have qualified managers and advisers and/or you have never operated a business, you should probably enroll yourself and your administrative staff in some community classes and workshops to gain some experience.
Contact your local chamber of commerce, small business association of the Small Business Administration at www.sba.org for more information regarding these types of training.
