Courtesy of Tom Ploskanka –

There is no substitute for good preparation when asking for a business loan.

The lender has three main questions. How much do you want? For what will the money be used? How do you intend to repay the loan? There are several parts to the answers for each of these.

You will need a detailed list of what the money will go for. Are your expenditures reasonable in light of what you intend to accomplish? Will you be buying items which will improve your list of collateral to support the loan? The nature of what you are buying will help determine the payback period. The purchase of inventory will require a shorter payback schedule than, say, the purchase of machinery or a building addition.

And lastly, how do you intend to repay the loan? Will repayment come from future projected profits? And if so, how will you repay if the profits are not forthcoming?

Here is a list of the written material you may be asked to submit:

• Three years of prior income tax returns.
• Three years of company financial statements.
• Personal balance sheet with cost and fair market value of assets.
• Your personal resume, including your business experience and educational background.
• A business plan with projected financial statements including cash flow statements.
• Collateral list showing cost and market value as well as any debt against the items.
• Contracts that concern income intended to be used for loan repayment.
• Franchise agreements, if any.
• Lease agreement for the business premises if you don’t own the property.

While assembling your loan package, keep in mind the lender’s overall concern: how much do you need, for what will you use it, how will you pay it back?