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Bank Loans

Recently taking loans from banks is easy as compared to venture capital funds because there are large numbers of banks are available. But the loan process is not too much easy. If you want loan only for temporary basis to recover the shortage of cash then getting loan is difficult for you. Creditworthiness is the most important factor which banks checks for giving loans. These tips can enhance your chances of securing a bank loan,

Get your documentation in order:

For bank loans your business must be in operational form and generating continuous profit from last three or years. If the business faces loss then the banks don’t provide you any funds.

The credit history and credit score also plays an important role in the loan decision making process. You business must have enough collateral that will cover the amount of loan in case of default. Otherwise bank may ask for your personally guarantee (personal property as collateral).

Tell the reasons:

Do not just say to your bank that you want a bank loan, provide your complete documents, and expect that the loan officer accept your proposal and give you the loan. You must give reasons why you need loan? Pay back process, your future plans (how you get profit) and how your business grow in future.

If your business does not meet the bank minimum standards you must convince the banker in proper way that he/she will not refuse your proposal.

Short-term financing needs alternatives:

If you need short term financing and you do not qualify for traditional bank loans then you must use alternatives to secure your position. But remember that the rate of interest is more in these loans as compared to other traditional bank loans almost its rate is double from the later one. 

Asset based lending and factoring are the major and mostly used lending alternatives which helps small businesses a lot. In factoring the company who need short term finance sells its financial assets (account receivable) to the bank and the bank provide short term loan of up to 80 percent of the value of account receivables. Asset based lending is more similar to the normal banking loans in this bank or lending institution will assess your all assets i.e. account receivables, fixed assets and values of the stock to determine the total creditworthiness of the business and gives a line of credit.

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