Determining the amount of your loan

 

If you are applying for a business loan, then you must already be a few years into running your own company.

These loans are meant to boost your revenue potential by helping you acquire necessary items.

Your lender spends a lot of time analyzing your business and personal financial situation when you seek out a business loan. Some people are willing to put their personal assets on the line, while others prefer to keep business endeavors separate. Even if the lender makes some changes, it is a good idea to go in with an idea of what you desire to borrow. There are a few things your lender may look at when determining the final amount.

Credit and Collateral

Credit checks are a regular part of most loan applications. This is not something you can get out of. It is best to confront your credit before you apply so you know what you are dealing with.  If you find a lower score than you prefer and have some time to work with, focus on some credit repair before you apply for a business loan. Be prepared to have both your business and personal credit score under scrutiny. For a faster fix, you may need to contact a credit repair company. 

Some lenders are willing to work with collateral when credit is less than stellar. This, however, may involve bringing your personal assets into the equation. This can be risky if your business is having problems already. Using your home for collateral, for example, leaves you without anything if your business fails. This is not recommended and should only be considered if your business is showing steady growth. Better options may include using your business equipment or other business assets. This keeps your personal property safe. 

Personal and Business Income

You can also expect for all your income sources to be checked. This may be done by looking at bank accounts, business records, and tax documentation. Your lender wants to know how much money you typically have leftover at the end of each month, so they do not loan you more than can be paid back. If your business is doing well, this can help you immensely. It is much easier to get a loan for a growing business than to try and rescue a failing one. Be sure to show documentation that shows your growth patterns. Business Loans can be a great asset in the right situation.

Financial Responsibilities 

This is also a situation where both your personal and business information may be assessed. Lenders need to see how much money you have going out on a regular basis. Their goal is to help you, not overextend you. They may look at things like mortgage, car payments, and credit card debt for your personal finance. When it comes to your business expenses, they may look at things like rent for office space, salaries to employees, and advertising expenses. 

The best way prepare for a meeting with your lender is to have your financial paperwork available. When you are organized and upfront about your expenses, a lender is more likely to take you seriously. You also need to remain realistic about what you can pay back in a decent amount of time. Business loans are meant to go own for several years, however, you should not feel overwhelmed every month by the payments. A lender knows how to choose an amount that you can afford.