subject: Tips For Applying Business Loan [print this page] Imagine this situation, you own a small business and you wish to extend your line but you do not have sufficient modal and resources. So, you decided that you would apply for financial assistance from banks. Therefore, this piece of article is to share with you on what you should have in order to be a successful applicant.
1) Criteria set by bank.
When applying for the loan, it is important that you are able to meet the minimum requirements set by the bank. Some of the requirements include:
- Three years of business in operation.
- Business operation is supported by up-to-date certified audit financial statement.
- Industry involved is not in blacklist of the bank. For example, construction, computer, textile, food and beverage, automobile.
- Date of application must not be less than 18 months from last certified audited financial statement.
- The company or its director, partners and proprietor does not have adverse financial record.
Some applicants fail to apply for the loan because they fail to meet the criteria mentioned above.
2) Documents and information
Proper and up-to-date information and documents is important while applying. Unsuccessful applications are due to lack of documents required of applicants such as:
- Account on the latest management.
- Documents of fulltime accounting staff to generate monthly account.
- Documentation of tenancy agreement for the business premise.
- Healthy balance sheet that shows positive shareholder fund and retained profit, low gearing ratio, low existing bank borrowing utilization, clear of debts and short debtors collection period, and low trade creditors balance.
3) Prospect of business
When applying for loan, the bank will take into account the progress and future of your business. Hence, you must convince the bankers on the prospect of your business. Support your statement with contracts or other form of evidences. Demonstrate and show that your business will not be adversely affected should there be unforeseen changes in business environment.
Another main point which will determine whether you are able to apply for the loan is your working capital. Your working capital requirement will be determined by the banks before your application is processed. If the banks think that you have sufficient bank facilities, the bank will not consider additional facilities for you.
