How to Prepare Ourselves When Applying for a Loan?
Posted on November 15, 2015
At specific times, obtaining financing is quite easy to do, it isn’t always be the case. Many lenders could offer rather confusing services as stated in their advertising messages. In the finance market, the competition can be quite intense. There are many deals and rates that we should consider before we choose a financing provider. It is also quite difficult to find proper professional advices. Many financial managers and advisers have vested interest related to loan arrangement, so they could gain enough commission from the actual lender. It’s also something that we can say about banks. Each bank branch can be rated on their loans and sales of any non-banking products. It is quite often that we have a doubt about specific loan that we want to apply. In this case, we should see an accountant who could provide an unbiased recommendation. In any case, lender will ask for enough information when it decides whether we can be granted a loan. If we apply for a loan, a considerable amount of information about our business will be required, as well as details related to the purpose of loan applications.
In many cases, we need to get a loan to finance cashflow problems, to purchase new equipment, to carry out improvements or for other things. Lenders will require us to provide information on how the money will be used. This is essential because lenders need an assurance that we are in a good position to repay the loan over a specific period of time. There’s no point asking for money, if we have no preparation on how to properly secure a loan. We will never be successful if we are not fully prepared. The following details are the minimum that may be required by our lender:
- How we think the loan will make improvements in our business
- The reason we ask for the loan
- A copy of our business plan
- The period for which we need the loan
- How we propose to repay our loan
- Historical profitability of our business
- Details of other overdrafts and loans
- Copy of our year-end accounts
If we plan to borrow a larger amount of money, the lender could require a type of security. Lender will ask a number of questions and we should be prepared for them. As an example, lenders will ask whether the loan is actually necessary, whether we have acceptable net profit and others. We must be properly prepared to answer these questions. When planning to obtain a loan, we should be fully confident with our goal. We should be in control and we need to be completely conversant with any of the details. We should be aware of the loan terms, before we are committed to it.
When in doubt, we should question the conditions and terms to see whether they can be amended or changed. One essential step is to consider when applying for the loan s to critically and constructively analyze it. Another question that we should ask to ourselves is whether there are other alternatives that we can use.