Suppose you’ve been in business and haven’t experienced borrowing charges at this level previously. It raises many questions. Will interest rates fall down? Should I consider a variable rate? It depends. Consider borrowing money like any other investment. What is your rate of return on business investment in comparison to the cost of debt? What’s the opportunity cost of not borrowing money?
Taking on money, regardless of interest rate, should not be taken carelessly. Before approaching the bank, assess your finances and forecast the impact of increased debt on revenue and cash flow.
When you are ready to meet with the bank for borrow loan, be prepared to exhibit (and discuss) the following:
- Your company plan: If it’s been a while, dust it off and make some updates. Who are you? What are you doing? What products and services do you provide? Who’s on your team? What impact will increasing debt have on the business? Summarise past performance, make predictions for the future, and provide a narrative about it all.
- Financial statements: Think about all of your supporting facts. Prepare to present three years of both business and personal tax returns, as well as the most recent year-to-date income statement and balance sheet for the business. You should also prepare a recent personal financial statement, as well as any bank and investment statements, to prove your liquidity.
- Understand what you need: Your lender will want to know how much money borrow you need. Be prepared to answer this question; don’t rely on them to tell you what they think you need. Your bank wants to feel comfortable lending you money for something you’ve considered.
- Have a plan for use: While it may seem convenient to have a loan for emergencies or to keep in your back pocket in case of a need, you must demonstrate that you have a current need for the funds. Show the lender how the money will be used and why it is necessary for your firm.
- Business accounts: Accounts payable and/or receivable are aging. Depending on your business model, you can need both or just one.
- Insurance information: This may not be an initial review, but if the bank is going to take on risk by backing a loan or funding on your behalf, you must have appropriate insurance policies in place.
While the statistics in the financial information above will provide a mathematical picture, you should be prepared to discuss how you intend to repay your loan(s) and how long you anticipate it will take. Balance sheets, profit and loss statements, and other financial documents, as well as sales predictions or additional business revenue techniques, will be useful here.
While your bank will expect you to supply a lot of information, be prepared to conduct your own due research and arm yourself with knowledge about your cash finance loan or funding.
Don’t be hesitant to ask questions along the route and communicate with your banker several times during the loan procedure. A great banking partner will be with you every step of the way, doing their best to offer you the assistance and answers you require. You can also ask questions on an easy money loan app.