Factors Of Eligibility A Lender Will Consider Before Lending Money To Any Business

Your business may be expanding and you will need more money for capital investment and to buy equipment. You will also need money for several other business operations including receivable balances in fund increasing accounts. Therefore, you will look for sources to raise funds to meet your project needs when you will be confronted with a question as to how you can convince a bank to give you a loan for your business needs. There are a few factors that a banker or a lender will consider before lending you or your business any money.  This is done to ensure that the money lent is safe and sure to return.

Stick To The Basics:

Bankers and other lenders can be your ally only when they find that your business is safe and all documents are in order to support the stability of your business. Therefore, it is required to know how a banker will look at you as an entrepreneur and understand how you can increase your chances of obtaining the loan that you want.

The first thing you need to understand is that the lenders will be more objective when they look at your business and its status. There is very little chance that the opinion of the lender will jive with your vision as that is not their objective at all. They will care for their money and its safety and therefore they will stick to the fundamentals of loan dispersal.

More Than A Friend:

When you want to avail a loan you must remember as an entrepreneur that the bankers are here to make business too. Just as they need to find and retain their clients it is also important for them to ensure that the money is safe.

They are an invaluable resource for money for any new business owner. Most people rely on banks and other reliable lenders for funds. They look into and scrutinize several business projects every day or week and therefore are a very useful and reliable source of advice. They have much more experience than any individual entrepreneur. Therefore, you can expect that any information suppressed or misrepresented will be soon revealed. However, to avoid a potential rejection of your loan application, make sure that you take a look at your business before applying for a loan.

Key Factors Considered:

There are a few important factors that the lenders will consider when you want to take a loan from them whether it is to start a business or expand your existing venture.

    Your professional, as well as the personal profile, is the first thing a banker will consider and look at. They will judge your previous business experience and your character and this first impression will count a lot. From your attire, attitude and the way you present your project, the banker will look at all and assess your capability to manage a business. Therefore, your project must include an updated CV highlighting your skills and expertise.
   The viability of your project is the next factor that the lender will consider while considering a loan application. They will find out how realistic is your business project and what the potentials are in short as well as in the long run. Apart from that, the lender will consider the strengths and weaknesses, opportunities and the risks involved. They will also consider the business plan to find out financial forecasts, the experience of the management team and the marketing strategy.
          Your financial capacity is the next factor that the lender will consider. Therefore it is required to have a solid credit history and a good credit score may be in excess of 750 points. It will tell a lot about your trustworthiness and dependability. It will also provide the banker with insight into your ability to run a business and make it successful and profitable.
     Your plan to use the money if received will also indicate your intentions and how serious you are with your business. You must be ready and committed to sharing the risk which will raise the interest of the lender. Since money lending involves risks the lender will be more concerned about your plans to repay the money lent to you with or without any collateral security.
          You must have proper and extensive knowledge of the market that you want to enter into and the fierce competition that you are about to face. You must have proper plans to overcome challenges, obstacles and competitions. This requires sound analysis of the situations, market, accounts as well as the economic context.

The purpose of the loan is another factor that is crucial to get a loan from a bank or any lender. Well, obviously it will be for your business benefits and use but it is more effective to convince the lender that you will be better off using the borrowed money for your business. Lenders usually get queasy about desperate borrowers. Therefore, be specific about the amount, your purpose and your plans.

Elements Of A Business Plan:

The most important document to avail a business loan is the business plan. Make sure you’re your business plan includes a summary of your business, the products and services, competitive environment, the experience of the management team, your target market and most importantly the financial statements.

All these elements will help the lender know about your business and then proceed with the loan application further. 

Usually, lenders and banks use the five C concept that includes character, collateral, capital, capacity and conditions.

Therefore, before you even start contemplating of taking out a loan for your business make sure that you know your business well and have all documents ready for easy and ready perusal.

Author Bio:
Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long term wealth plans. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.

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