Important Factors to Check Before Going for a Loan

Banks and government agencies are two of the most common sources of financing those entrepreneurs can find to start their business. If you decide to opt for this path to obtain the necessary funding, you should know that there are several documents that you will need to have prepared before the application for the loan from Also if you are going to start your new business and have not enough money for it then you can apply for loan and can easily start your business. But before applying for a loan from bank and government agencies make sure about the terms and condition of loan. Only apply if you can complete the requirement of loan.

Here is a list of the four main ones. Write down and start preparing:

  1. Develop a Business Plan. The lender will want to make sure that you have a credible business proposal, and that you understand the products you offer and the market in which you are operating.

Use the business plan to demonstrate your understanding of the industry and your particular experience. Also business plan help you to confirm how much cash you need to start your business so you can apply for loan accordingly.

  1. Detail the financial status of your project. You will also want to provide the cash flow projections to the lender to indicate that there will be a constant cash flow to help pay off the loan.
  2. Include your personal credit history. While it is true that companies are treated as financial entities of the people they lead, in the early stages of an entrepreneur’s career, lenders will want to examine your credit and income history. The revision of this document is the way they have to counteract the lack of history with their own companies.

It will also be significant that you put in copies of your complete tax returns for the past few years, in case the lender needs to review your personal income history.

  1. Identify the purpose of the loan. This is very inaccurate. The lenders want to know that you have a clear idea of how you are going to use the credit. To overcome it, identify the main pieces of equipment or projects to be financed that will be used for the loan.
  2. Determine your guarantee capacity. Lenders want to know what guarantees can be used to support the investment. All assets such as property, equipment, or something else of tangible value to guarantee the loan since these can be sold to generate funds for repayment in case of default is not met.
  3. How much can I borrow based on the active account that I use as collateral?

Before going to apply for the loan make sure about how from the bank. Like if you product cost Rs 20,000 then you will only get 70% of this amount from the bank. Make sure about the rest amount. Because bank only allow to apply for 70 % amount of actual cost required.

  1. Are my personal finances in order?

Bankers will want to see your “global financial statement,” including personal information such as outstanding student loans, credit card debts and mortgage payments. Until your business reaches a considerable size (at least 5 million pesos in annual income or more), the bank will depend largely on your personal financial status and your credit points to determine the solvency of your business. “If you have a large mortgage and you also have student loans, the bank will not see you as a good candidate for a loan.