Factors You May Have Ignored While Applying For A Business Loan   by Alan Lee

in Finance    (submitted 2011-01-06)

Only a business loan approver will really know what is being used to assess whether an application will be approved. However, that does not mean that you should be obnoxious when it comes to applying for a business loan. Make every effort to help your case. After all, the loan that your business is trying to obtain may just be the injection that will take it to the next level.

Here are 2 factors that you should take note. They can help your application when it really matters.

1) Personal net worth

The net worth of key personnel in the business can be of particular concern to a lender. Although it is your company that is trying to obtain a loan, bear in mind that the company is run by the key people in it.

Having directors that have a high net worth can help a lender to be more comfortable in granting a business loan to a business. This can be especially so in border line cases.

Personal net worth can consists of personal savings, shares, insurance. There is one asset that financial institutions favour a lot. And that is unencumbered property. These are properties that have been fully paid up and are not pledged for any financial facilities. So make your property holdings known to boost your personal net worth.

2) Nature of Business

It is generally accepted that certain types of businesses have higher profit margins while others have lower margins. Some industries are seen as booming while others are judged as massively declining.
Sometimes a business borders on being a construction company or an engineering company. Engineering businesses are generally accepted as being much more profitable in terms of margin than construction businesses.

When a business analyst assesses you business and deems it as a construction company when you know very well that you are providing an engineering service. You should make an effort to prove that to the analyst.

Because profit margin is a key figure that can be used while assessing your business loan application, a failure to fully understand your business nature can lead to rejection. This is simply because the margin for your determined nature of business is judged to be unable to repay the loan.

There are many ways that business natures can be misjudged. Use documentation to prove otherwise when you know that you lender has yet to fully understand your business nature.

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