How to analyze Sba loan approval indicators

EarningsLoan is paid with cash, not profits. If cash outflow exceeds cash inflow for an extensive period of time, a business cannot continue to operate. Sba loan applicants are required to reasonably demonstrate the ability to repay the intended obligation from the business operation. Lender takes under consideration the following: the cash flow from the business, the timing of the repayment, and the probability of successful repayment of the loan. Payment history on existing credit relationships (personal and business) is considered as an indicator of future payment performance. Working Capital Working capital is the excess of current assets over current liabilities, both balance sheet items. Current Asset is the sum of cash, cash equivalents, accounts receivable, prepaid expenses, inventory that can be converted into cash in less than a year. Current liabilities are obligations due within one year. As a result, working capital measures ability of the company to pay a company's current debts. The availability of working capital is crucial for the company to meet its continuous operational needs, to meet its trade and short-term debt obligations, as well as to remain financially stable.Collateral Collateral is required as security on all Sba loans. Collateral is an additional form of security to show a lender that you have a second source of loan repayment and SBA will consider a loan where inadequacy of collateral is the only unfavorable factor.Collateral can consist of business assets such as equipment, buildings, accounts receivable, and inventory and personal assets that remain outside the business. Depending on how much equity you put in the business, the lender might request additional assets as collateral.Every owner of 20 percent or more of the business and key managers are required to sign loan's personal guarantee. For loans greater than $250,000 secured by commercial real estate certified appraisals are required.Resource Management The ability of individuals to manage the resources of their business is the prime consideration when determining whether or not a loan will be made. Character and Managerial Capacity The lender decides subjectively whether or not you are sufficiently trustworthy to repay the loan. Character is the personal impression you make on the potential lender.Managerial capacity such as your educational background, experience in business and in the industry will be reviewed. Lenders also review the quality of your references and your background. Ratios Lenders review the following key ratios:Debt to worthThe rate at which income is received after it is earnedWorking capitalThe rate at which debt is paid after becoming dueThe rate at which the service or product moves from the business to the customerGetting the SBA Financing is not an easy and fast process and requires methodical and well premeditated preparation. It is always a good idea to hire a seasoned Financial Professional to consult you during this process.Yury Iofe, MBAUniversal Business Structured SolutionMore educational resources by Yury Iofe:www.ubssolution.comhttp://www.ubssolution.com/Education.html