Who Is Eligible To Receive A Bank Business Loan?
In order for a business to run smoothly, proper management
, hard work and of course, money are needed. Whether you are just starting your own business or have been in the industry for years, additional funds is one of your main concerns. This is the reason why more and more lenders are offering small business loans and start-up business loans.Still, many business owners and entrepreneurs today want to know whether or not they are eligible to receive small or start-up business loans. So to help them in this matter, allow us to identify four criteria used by lenders and bankers in assessing the eligibility of their small business loan applicants to assume financial assistance.
Criteria in Assessing the Eligibility of Businessmen for Small Business Loans
1. Financial Capability to Pay Back the Small Business Loan. Credit and lending firms will carefully consider the financial standing of your business first before they will provide your business credit accounts. To check if your business is earning enough, they will check your financial statements and books. The information that prospective lenders and creditors will see on your records will help them gauge whether or not your business can generate sufficient earnings to pay back the small business loan you intend to take.
In most cases, business owners who have been managing shops, stores and other commercial enterprises for more than three years have the greatest chances of getting approved to take small business loans. On the other hand, entrepreneurs who plan to put up their own businesses may find it hard to secure the start-up business loans they need.
2. Collateral Provided against the Loan. Secured business loans typically impose lower rates of interest. So, businessmen and entrepreneurs are encouraged to pledge assets or properties against their small or start-up business loans. You can tap on the equity of your business assets such machinery, equipment and inventory. You can also pledge your personal properties like your car, home and other real estate assets against the loan you intend to take. In so doing, you can maximize your chances of getting approved for the small business loan you need.
3. Your Capital Investment on the Business. Lenders will also ask about how much money you have invested on your company. The reason for this is that the amount of cash that you have placed on your business will display the confidence level you have on your business. So it will be wise to invest a substantial amount of money on your store, shop or commercial establishment. But suppose you do not have sufficient savings to invest on your business, what should you do then?
The answer is to make and present them with a comprehensive business plan. What are your plans regarding your business? How are you going to pay off your start-up business loans? The answers to these questions should be in your plan. See to it that your business plan demonstrates your dedication as well as your passion for your business venture. This way, you can effectively convince creditors to provide you the credit account you need.
4.The Credit Standing of the Borrower. Another important criterion employed by lenders in evaluating credit applications is the credit worthiness of the borrower. Lenders are only willing to provide financial assistance to those businessmen who are able to maintain high credit ratings. After all, they have an assurance that such entrepreneurs can and will repay the money they intend to borrow.
So, before applying for start-up or small business loans, make sure that you have an excellent credit standing. This way you can have a great chance of being granted the small or start-up business loan you wish to take.
Copyright (c) 2010 Irish Taylor
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