Monday, March 13, 2000
 

Are you creditworthy?

The U.S. Small Business Administration, banks and other lenders look at these things when evaluating loan applications:

• Repayment ability.
  You must show that you can meet business expenses, your salary and loan payments from the revenue your business generates. This is usually demonstrated through historical performance or thoroughly documented cash-flow projections.

• Management.
  You must show an ability to operate the business successfully. If your business is new, you should have experience in the type of business you propose to start, as well as some significant work experience at a management level.

• Equity.
  Owners must have a significant portion of their own capital at stake in the business. Some lenders say you should have about one dollar of cash or business assets for every four dollars you borrow. This can vary. Pledging of non-business assets, often a second mortgage on your home, may be required for collateral.

• Credit history.
  Your personal and company credit histories will be reviewed. If your credit record has blemishes, but there are extenuating circumstances, you should be prepared to explain fully.

Source: U.S. Small Business Administration