Business Credit Evaluation :: GCSE Business Marketing Coursework

Business Credit valuationCredit Review SummaryWhat asserts Look ForThe most fundamental characteristics a prospective lender will want to examine are - trust history of the borrower - cash liquify history and projections for the business - collateral that is lendable to secure the loan - character of the borrower - loan documentation that includes business and individualised financial statements, income revenue returns, and frequently a business plan, and that essentially sums up and provides evidence for the first four items listed The first three of these criteria are more often than not objective data (although interpretation of the numbers can be subjective). The poop item, the borrowers character, allows the lender to make a more subjective assessment of the businesss grocery store appeal and the business savvy of its operators. In assessing whether to finance a underage business, lenders are often willing to consider individual factors that represent strengths o r weaknesses for a loan. Also consider our discussion of how banks judge your application. Loan Application, Bank Review Form What Do Banks Really Look For?Financial dictation Last 3 years of business financial statements and/or revenue returnsLast 3 years of owners personal tax returnCurrent personal financial statementCash spring from OperationsWhy is there so much month left field at the end of the money? X UnknownThe cash flow from your businesss operations X the cycle of cash flow, from the purchase of inventory by dint of the collection of accounts receivable X is the most important factor for obtaining short-run debt financing. A lenders primary concern is whether your daily operations will grow enough cash to repay the loan. In addition, cash flow shows how your major cash expenditures relate to your major cash sources. This information may have a lender insight into your businesss market demand, management competence, business cycles, and all significant changes in the business over fourth dimension. While a revolution of factors may affect cash flow and a particular lenders evaluation of your businesss cash flow numbers, a small community bank cogency consider an acceptable working cash flow ratio X the amount of available cash at any one time in relationship to debt payments X to be at least 1.151. As most lenders are aware, cash flow also presents the most lamentable problem for small businesses, and they will typically require both diachronic and projected cash flow statements. Managing Your Cash FlowA level-headed cash flow is an essential part of any successful business.