What Lenders Look for in a Business

One of the facts about corporate finance is that borrowing money is necessary. Any business needs to be able to borrow money in order to keep up a cash flow that provides smoothness in operations. However, business loans are decreasing as banks worry about the viability of businesses and the likelihood that they will be repaid. Here are some things that lenders consider before giving you a loan:

1. Business credit: Yes, you have to have business credit to get a loan. You can build credit with a business credit card that you pay regularly, or by paying off smaller loans you receive for your business. It is important to realize that business credit is separate from your personal credit.
2. Current cash flow: You need to show that your incoming cash can cover your obligations. This means that you should be able to make your payments with relative ease. You may not have the cash to cover and expansion or some equipment, but you do need to be able to make payments on a loan.
3. Capital: What do you have right now? How much capital does your business have now, and what about your personal net worth, which can be used as a back-up if necessary?
4. Collateral: Your business needs to have something of value to help secure the loan. This can be equipment, inventory and real estate or some other tangible property.

Additionally, lenders may assess the current business and economic climate. This is what is causing problems for some businesses right now. It is vital that you improve what you can control in an attempt to make yourself more attractive to business lenders.

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