4 Financial Factors That You Must Consider
To Get Approved For A Loan
One of the most effective tools for surviving a cash dilemma — especially for short-term or seasonal purposes — is a line of credit. But be aware, the best time to get a line of credit is when you DON’T need one.
That’s because, if you approach a lender in the middle of a cash problem, you’ll be considered a high risk. So to increase your chances of getting approved, approach lenders while your finances are in good shape.
And when you do, consider these four factors:
1. Cash Flow – Cash flow is how the loan is expected to be repaid. More than ever, lenders want to know how the business works, about its customers, how it competes, and why it needs the cash. And often, they’ll ask for cash flow projections.
2. Operational Influences – Lenders may want even more information – such as, how much total debt you have compared to net worth, how many times your inventory is sold during the year, etc.
3. Lending Against Inventory And Receivables – No financing has been more vital to small business owners than loans against inventory and receivables. But lenders are becoming more cautious and doing more physical inspections.
4. Cash From Owners – To limit their risk, lenders often request that owners put more capital into the business.
The importance of these criteria will vary depending on the lender. But no matter where you apply, you’ll have to provide a clear picture of financial health – including your cash position