At one point in every businessman’s life, they had to borrow money from another person or company. This does not mean that they lack money, or they are on the verge of getting bankrupt. Business loans are essential to keep the company running finances-wise. Several company owners file for business loans for several reasons.
For one, these companies want to expand their business, and they need extra finances. When a business grows, that means there is a need for money. For a person to apply for a business loan, there should be a lender. Here are some needed things before contacting a lender for potential business loans.
Collateral
If you are going to borrow to a bank, collateral is needed. Collateral can be in the form of pledging your monthly sales as payment for the loans you will get from them. This way, the bank will be assured that the money they are going to lend to you will be used for business purposes.
Another collateral can be in the form of personal property, such as a piece of lot or farmland. These are the common collaterals because most business owners have this.
Business plan
Before you apply for a business loan, you need to have a business plan. A business plan will give the lender a glimpse of where you are going to use the money you will ask from them. The business plan is likewise essential because it will guide the lender’s decision of how much money to let an individual borrow.
Statements of financial position
The balance sheet of every company is also a must when applying for a business loan. Under the balance sheet, the company’s assets, liabilities, and net worth are listed per item. This will give the lender a bird’s eye view of whether or not the company is getting profit.