What Are Your Chances?

There are several key areas that lenders use to evaluate potential borrowers.

• Credit. For established businesses, the lender will focus on the company's credit and outstanding accounts. For businesses less than three years old, your personal credit will also be evaluated.
• Cash flow. This includes audited results and detailed future projections. Many lenders require a cash flow that is 1.25 times the total cost of the company's total and expected debt.
• Collateral. Real estate, valuable equipment, or other property can be used as collateral that the lender can seize if you default on the loan. In some cases, contracts for future work can be used to guarantee loans.
• Management. Your management team's ownership experience, tenure with the company, and familiarity with the industry will all affect your chances.
• Capital and equity. This is the total value of your cash on hand, equipment, facilities, and other tangible assets. "Debt-to-equity ratio" is often used as a rule of thumb - lenders will look for situations where your total debt is no more than 3 or 4 times the equity.

None of these have hard-and-fast rules, however. Other factors such as proven profitability and the quality of your business plan will contribute to the lender's decision. There are several steps you can take to improve your chances of getting the loan you need: