Whether you are
applying to a bank for a home
equity line of credit, a line of
credit for business working capital, a commercial short-term
loan, an equipment
loan or lease, real estate financing, or some other
type of commercial or consumer
loan, many of the same basic
lending principles apply. The most fundamental characteristics a
prospective lender will want to examine are:
- credit
history of the borrower
- cash
flow history and projections for the business
- collateral
that is available to secure the loan
- loan
documentation that includes business and personal
financial statements, income tax returns, and frequently a
business plan, and that essentially sums up and provides
evidence for the first four items listed
The first three of these criteria
are largely objective data (although interpretation of the
numbers can be subjective). In assessing whether to finance a small
business, lenders are often willing to consider individual
factors that represent strengths or weaknesses for a loan.
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