Many of the most successful businesses are financed by lenders, which can provide small to moderate amounts of capital at market costs. Although most alternative lenders (like STRADA) do not ask to see a business plan, traditional lenders might.
Here are three things a lender might look at:
- Cash flow. One of the most convincing things you can show a banker is the existence of a strong, well-documented flow of cash that will be more than adequate to repay a loan’s scheduled principal and interest.
- Banks might look for collateral to strengthen your file. It may consist of machinery, equipment, inventory or, all too often, the equity you own in your home.
- Many lenders like to look at the signor’s character as well as their financial strengths before making a decision.
As a business owner, you should try to foresee times you’ll need to borrow money and arrange a line of credit or a loan before you need it. Knowing what a lender is looking for will help you to be better prepared.