As part of the small business plan, the financial position will have been identified in the start-up phase and included in the overall business plan. In instances when the small business has insufficient finances, the business owner may seek additional financing.
Lenders or financiers need assurance that borrowers will be able to repay the loan, both the principal and interest, in the timeframe designated. There are certain considerations that concern financiers or lenders to which small business owners must attend. These include the following:
- Commercial viability of the loan application.
- Financial well-being of the borrower's business.
- Availability of security, such as real estate property and other assets.
- Ability and expertise of the small business owner.
Checklist to Prepare for Fund Providers or Lenders
Before seeking the assistance of a lender or a financier, make sure you can answer the following questions.
- Do you have the sufficient security available to offer the funds to the provider or the lenders?
- Do you know what information your financier or lender will require?
- Do you know how to prepare a loan application?
- Have the source or sources of finances been identified?
- Has the possibility of borrowing the needed funds been assessed?
- Have you invested your own money as much you can afford?
- Have the most appropriate balance of equity and debt capital requirements been taken into consideration?
Accounting and Keeping of Records
In recording business transactions, the typical accounting and record-keeping books are used, which include a petty cash book, a cash receipts analysis, cash payments analysis, general ledger, creditors ledger, debtors ledger, time and salaries book and a general filing system.
A bank account with a deposit book and checkbook needs to be in place. A small business owner also needs to know how to prepare a bank reconciliation, although some small businesses, including work-from-home businesses, often seek their accountants to do the tasks for them.
To produce a profit at the end of the financial year requires constant monitoring, and in particular, control of the two components of the profit budget, which are sales and overhead expenses. Another important aspect to remember in business survival is cash management, that is, to ensure the availability of cash. The challenge mainly depends on the small business owner’s abilities and resources.
With the advent of the Internet, there has been a proliferation of business loans online where the terms and information on the lender are immediately available. In fact, once the right lender is decided on by the business, the loan process can immediately start. This is because an online application needs only filling out.
Online loan applications may be a great way to save time and energy, but whether a fund provider is chosen online or not, the most important aspect is the availability of the business plan, which is the first thing that any financier looks for and which determines a loan approval or rejection.
Interested readers may want to check out the following related articles in terms of small business planning and readiness checklists: Financial Position Check Prior Small Business Start-up, Readiness Checklist for Small Business Starting Up, Why Small Businesses Fail and Trends in Small Business and Barriers to Starting a Small Business.
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