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Copyright 2005 The Powerful Promoter
The process of applying for a business loan is a
stringent one as compared to the standard procedures
in obtaining a home mortgage loan or a personal
loan. This is probably due to the fact that business
loans contain a greater risk element as compared to
other loans. Therefore, lenders need to exercise
greater caution and emphasis when evaluating
business loan applications in order to minimize
their risk exposure.
With that, lenders evaluate their applicants based
on the information that are provided as well as
their judgment of the viability and profitability of
the business being financed. Thus, business loan
applicants will be required to submit a loan
proposal along with their applications with the
purpose of creating a positive impression upon the
lender.
The first element of a loan proposal is an executive
summary, providing short descriptions of the type of
business and the industry, the purpose and usage of
the loan, the proposed repayment conditions as well
as the intended loan period. After that, the company
information is provided, enriching the reader with
the nature of the business, the location of the
business, company history, the products or services
provided, key differentiation factors of the company
or the product, the general growth of the industry,
competitive information, growth potential and target
customers.
It would help if you could include your company
marketing strategy, detailed product information,
historical information as well as projected growth
plans for the company. Apart from that, if you plan
to incorporate product or service extensions in the
future, you should provide these descriptions within
your loan proposal. If possible, geographical
expansion plans will help in the proposal.
The next area that needs to be showcased in the
proposal would be the credentials and experience of
each member of the management team. Impressive
credentials will provide assurance to the lender
that the company is managed by individuals who are
responsible and capable. This is important as having
the wrong people managing the company could be
detrimental for the business.
In any loan application, historical records are
essential to be used in evaluating the performance
of a company. As new companies do not yet have these
records, the financial records of the owners will be
used as the basis of evaluation. Income tax returns
forms are also required by lenders. All of these
records provided should be the latest copies less
than 90 days old, with the exception of the income
tax returns form.
If the loan is applied for an existing company in
active operations, company financial statements,
including profit and loss accounts, balance sheets
and the net worth reconciliation record should be
included in the loan proposal. Again, all of this
information should also be the latest and less than
90 days old. Additionally, a listing of accounts
receivables and other short term and long term debt
should be attached.
On the other hand, if the loan application is
submitted for a new business, a pro-forma balance
sheet and profit and loss account should be
provided. Apart from that, a cash flow projection
for the upcoming year is drafted to indicate the
possibility of recovering the debt. This also means
that projected revenue, profits, costs incurred and
expenditure should be listed out with definite
explanations provided as well as a list of
assumptions.
If you possess assets that you wish to use as
collateral for your loan, details for this should be
provided to the lender as well. It is often common
for lenders to request for dual sources of repayment
in the event that one source is defaulted. This
means that if the business owner defaults on his
repayments, the collateral can be sold in order to
recover debt.
Finally, other documents normally required for a
loan application would be items like the article of
incorporation, lease agreements, partnership
agreements, license, references, etc. As the list of
required documentation, information and attachments
differs between lenders, it is best to check with
the individual lender on their specific information
and documents required to be attached with the loan
proposal.
About the author:
Matt Bacak, The Powerful Promoter and Entrepreneur
Magazine e-Biz radio show host, became a "##1 Best
Selling Author" in just a few short hours. He has
helped a number of clients target his specialty,
opt-in email direct marketing systems. The Powerful
Promoter is not only a sought-after internet
marketer but has also marketed for some of the
world's top experts whose reputations would shrivel
if their followers ever found out someone else
coached them on their online marketing strategies.
For more information, visit Bacak's site at
http://www.powerfulpromoter.comor sign up for
his Powerful Promoting Tips at
http://www.promotingtips.com
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