How to Create a Business Loan Plan All Types of Lenders Can’t Resist
When planning to apply for a business loan, there are several factors that should be considered before you are able to acquire the finances necessary for your business. These include components that lenders will be eyeing when evaluating your business loan application.
This is where a business loan plan comes into the picture.
For SMEs and entrepreneurs, a business loan plan is crucial in financing your business needs. However, not all lenders work the same. That said, it’s important to know just how to formulate a successful business loan plan that is capable of addressing your business needs (such as funding working capital, equipment purchase or plant expansion) as well as providing the lenders with what they need to know.
Marketing Plan
Providing a marketing plan will show lenders that you are well-informed in your industry and market. Not only will it show how familiar you are with your customers, it will also tell lenders that you are aware of the threats and competitors of your business, as well as how you intend to address these matters whilst keeping your finances afloat.
Cash Flow
Proof of steady cash flow is an important element that lenders pay attention to in business loan plans. By supplying documentation of your cash flow, you are assuring lenders that you are capable of repaying a loan and actually sticking to its payment schedule. Ultimately, it will strengthen your case to the lender, showing that they can be assured of your repayment.
It’s worth noting, however, that a forecast of just your future cash flow may not suffice. Lenders may look into your financial history, and as such, providing important documents — tax returns, income statements, bank balance sheets, and even any current debts may be reviewed by lenders as part of their business loan evaluation process.
Personal Guaranty by Business Owner
In the event of a less favorable debt history, having a co-signer included in your business loan plan may help improve your image in the eyes of lenders. Essentially, a co-signer shares the responsibility of the loan. With this, borrowers are given more credibility thanks to their co-signer’s history of good credit.
Such approach further stresses on the importance of maintaining a good credit score. Being aware of your own credit score will benefit you in the long run, as it may help increase your chances of acquiring that coveted loan for your business.
Collateral
In a similar vein as the concept of co-signers, lenders may look into requiring a collateral when approving a business loan. This downpayment acts as a means of insurance for lenders. Collateral provides lenders with an assurance of recovering any potential money lost in the event of a failure to repay the loan with interest.
Credit Rating
Knowing your credit score — and whether or not you are maintaining an ideal credit rating — may not be enough to entice lenders into approving your small business loan plan. It is advisable for a business owner to know the ratings of the main aspects of the business that lenders will evaluate before applying for a business loan. Those aspects include Management Quality, Business conditions, and Financial Performance.
What may be considered a good credit rating for one lender may be perceived as a poor credit rating for another. This only goes to show that though there are several lenders in the market, their standards may differ across the board.
Whether or not your credit rating needs improvement may depend on the lender you approach. Should you need to improve your own credit rating, CreditBPO is here to provide you with a better understanding of your creditworthiness and how you can improve on your credit rating as you work towards securing an approved business loan.
For more information, please visit creditbpo.com or email us at support@creditbpo.com.
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