Where Do I Start With Business Loans?

Banks are usually very difficult to impress especially when you are asking them for a small business loan. To get a business loan from the bank, you will need to show the bank that you are capable of paying for the loan at the given period of time.

Normally you have to have two to three years of solid financials before a money lender will even consider lending you money. Often you need to have a strong personal credit record to be eligible for a decent business loan from start-up.

There are other lenders that offer business loans specifically for start-ups so the process is easier now than it was a decade ago. To stand the best possibility of securing those much-needed funds, follow these four steps in aiding your chances of getting the approval.

It’s Best To Be A Homeowner

As a homeowner you will already have a history of borrowing and are in possession of a large asset that can be used as security. Lenders are risk conscious. Business start-ups are in a high-risk bracket.

There is really no way to tell if your idea will work, or if you are a good money manager or if the execution of the idea will go as planned. They have to rely on your existing assets to pay the debt in the event you default.

Include All Of Your Assets In Your Application

The amount of borrowing you can secure is normally determined by the amount of security you can place against the loan. Being a homeowner is suitable because that is usually the biggest asset a person or a family owns.

In a business, there may be more than one person applying, so each person should list their assets as security to garner the highest loan possible. The items that are considered assets include:

• Cash

• Property

• Shares

• Bonds

• Vehicles

The higher your assets value the more money you are able to borrow. Be honest and be careful not to overextend yourself, as you are liable to lose each asset you use as security against your loan.

Prepare A Good Income Record

Have your old tax returns on record to demonstrate that you have had a good history of income. Even though starting a new business will affect this, it helps demonstrate that you are a capable earner and it makes the lender feel less cautious.

Account Exactly Where The Business Loan Will Be Allocated

If the lender can see where exactly the money is going they can ascertain if your application is viable. If you just make an application of $50,000 with no indication of how you are going to spend it then you may get rejected.

Your application needs to be itemized and you need to make an analysis of the situation and come up with your own solutions to the specific business risks. Put your solutions into writing and calculate your earnings.

Since the bank will mostly require you to represent a business plan that will cover a few years of business operations, you will need to spread the risk over the timeline indicated.

With all of the above information ready and in order you should be very well prepared to meet with your banker.

If you’re a homeowner with an adjustable rate mortgage that’s close to resetting to a higher and variable rate, I hope you’re ready to make the payment. If you can’t afford the new payment, you may not have anywhere to go for help. Specifically, don’t expect your lender to cut you any slack.

Does that mean no one in the financial world is concerned about the billions of dollars in mortgage resets coming in the next few years? No. The financial world is concerned….about themselves. Right now some of the major players are negotiating an $80 Billion fund to bail themselves out of trouble as their customers are unable to make their new, higher payments.

Jim Jubak of msn.com reports that all of this will lead to the inevitable – a massive flood of foreclosures and delinquent loans. Tens of thousands of homeowners will lose their homes or at least see their personal credit destroyed.

So who’s to blame? A lot of people want to blame the lenders for acting irresponsibly when they extended all this credit to questionable borrowers. I guess that’s one angle you can take, but I only agree to a certain extent. On one hand, the lenders are the experts and they should have advised the borrowers the real risks of such unorthodox loan packages. On the other hand, buyer beware. If you got caught up in the hype and bought way too much house for your budget, then shame on you. Foreclosure, and potentially bankruptcy, will be your reward. I’m sorry.

What can borrowers do? Well, the first thing you need to do is ring your bank’s phone off the hook. It will be tough, because they don’t want to hear from you, and they definitely don’t want to cut you a break on your payments or interest rate. But it’s worth a shot. Just a day or two ago we posted here about how Countrywide is helping over 50,000 of its borrowers so they can stay compliant with the terms of their loans.