Tips for financing your business.Loans are commonly judged by what is usually referred to as the five C's. 1. Character--Lenders want to know if you pay your bills and if you pay on time. They will examine your credit report to determine your debt repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan trends. 2. Cash Flow--Lenders will look at historical and projected cash flow statements to determine whether you should be able to repay the loan and still have a sufficient cash flow to adequately run your business. 3. Collateral--Business or personal assets may be used as collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although to secure the loan. lenders can claim these assets to satisfy the debt if the loan is not repaid according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the required terms and conditions. 4. Capitalization--Lenders will also look at a company's basic resources, including owner's equity Owner's equity Paid-in capital plus donated capital plus retained earnings less liabilities. , retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. and fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → . Lenders will also look at a borrower's cash or equity injection into the business. 5. Conditions--Referring to other factors that affect the success of a company but are external to the business. These can include government regulation, competition, and industry needs. Approval of your loan will depend on how well you present yourself, your business and your financial needs to a lender. Good documentation is critical. Preparing a written loan proposal which outlines your business plan will help you to achieve your goal. Choose a lender who will work with you and who is committed to helping your business succeed. |
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