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What business lenders will be looking for

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Business owners need to be aware that there is a great deal of preparation that needs to happen before they apply for a business loan or line of credit. The bottom line is that when you know that your business lender will be looking for you are far more likely to be successful in obtaining the business financing that you are seeking. Keep in mind that the process of seeking business financing can be lengthy. However, if you are diligent in the process you will improve your chances of getting the working capital that your business need. Here is what business lenders will be looking for-

• A healthy business credit score-If you are a business owner who is seeking business financing the first thing that you should do is to check out your business credit score. You want to make sure that your business credit report accurately reflects your credit history. Keep in mind that if there are problems or concerns it can take some time to fix them so you should complete this step long before you even begin the application process. You should also keep in mind that if you are trying to start up a business or your business is extremely new your prospective lender may want to see your personal credit report. Many lenders base their confidence in how well you will handle your business finances on how well you have handled your personal ones.
• Sustainable cash flow-There is not getting around the fact that financially healthy businesses have a healthy cash flow. Your lender will want to see that your cash flow can not only be sustained but also increased so that you will have the resources needed to pay back a business loan. You will need to work up a complete cash flow analysis that can show your lender just how much cash you can accurately predict currently and in the future. While it can be a time consuming task to do the research that is necessary keep in mind that your lender will not be impressed by your assumptions or your guesswork. You must be able to base your cash flow predictions on cold, hard facts.
• Some capital from the business-The reality of today’s lending market is that you will not be able to rely just on business financing in order to run your business. There will be other aspects that will determine if you quality for business financing. Most lenders will want to see that you have capital that is invested in your business. Keep in mind that this capital can be inventory or even equipment and does not have to be cash. You should have the invoices and valuations for any capital that you want your lender to consider.
• An ability to put up collateral-Today, most lenders will want some form of collateral to secure the business financing that you are seeking. You will need to be able to pledge an amount that makes your lender feel more secure and confident about giving you a business loan. However, you must keep in mind that anything that you pledge for collateral will become the bank’s if you default on paying back the business loan. This means that you should never pledge an asset that you can’t afford to lose. Far too often hopeful business owners have found out the hard way that the bank will take their car, home, or other personal asset when their business loan is not paid. Carefully consider what you will put up for collateral long before you begin the process of applying for business financing.

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