you receive these every month with your financial
statements when we return your books? Everything you need is there.
How much do you need? Using the ratios, determine how much you
need to borrow to reach your objectives. Be realistic. Most loans are for five years or
less with variable rates tied to prime rate.
Estimate the cost of funds. Decide what type of debt is most
appropriate for your situation (for example, short term loan vs. revolving credit). To
estimate the cost, use current rates, terms and conditions.
Forcast the results. Prepare two and three-year pro forma
statements: one showing how your company will fare with the proposed loan and another
showing the limitations your company faces without it.
When you’ve completed your analysis, package it with these
components:
Summary - Brief overview of your business, amount of
request, purpose of the loan and how you plan to repay it.
Business Description - Describe in detail your business,
it’s organization, mission, products, services, number of employees, type and
quantity of inventory.
Executive Profile - Highlight skills and talents of
yourself and key personnel. Outline qualifications and responsibilities and how they
contribute to the company’s success.
Marketing Research - Explain your current market
position, marketing plan and prospects for growth. Prepare sales forecast for one, three
and five years. Support it with industry wide statistics, demographic data and other
information.
Financial Statement - You’ve collected these in the
preliminary analysis. Include statements from the previous three years, current year, and
your two pro forma statements. Include personal financial statements and personal/company
income tax returns from the past two years.
Loan Request - Give a detailed explanation of why you
need the funds, how you will use them, and how the loan will benefit your business.
Include a description of the collateral which will secure the loan (accounts receivable,
equipment or personal assets). If the primary source of repayment is income, the secondary
source of repayment may include a pledge of property.
This may seem overwhelming, but don’t be discouraged. Thousands of
businesses seek and secure loans each day. Just remember that the best time to start the
process is before you need the money. By starting early, you can avoid the pressure of
deadlines and stay in control of the loan process.
