Saturday, June 22, 2013

How to Get a Business Loan.

Obtaining a business loan in today's economic culture is challenging. You might have perfect credit, but that doesn't mean you will get a great rate- if a loan at all. I've complied some tips to improve our chances for getting a business loan.

Start off by knowing your debt ratio. One of the most basic measures of a company’s creditworthiness is the Debt Service Coverage ratio, which shows a firm’s ongoing ability to keep in control both debt and interest. The Debt Service Coverage Ratio, defined as EBITDA divided by a firm’s current portion of long-term debt and interest expense, is an extremely important metric for predicting default.

Review your net sales. If sales are low you have to consider one of two options. First, increasing profitable sales and lowering production costs – take time to identify and implement. "Lowering production costs often involves finding ways to get raw materials or key services more cheaply or to use less of them. Or it can mean identifying new, more efficient methods of producing a good or providing a service," according to Karen Berman and Joe Knight.

Finally, If you can show less debt and less spending, you have a better chance for getting a business loan versus a person with perfect credit but a high amount of debt.


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