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Business Borrowing Basics

Maybe you want to buy equipment, launch a new product, expand your operations or get easy-to-access financing to manage your cash flow. No question about it. There are 1,001 reasons to borrow for your business. But before you even think about applying, it helps to understand the lender’s point of view in the financing process. 
Let’s face it. If you know how to think like a lender, you can take steps to enhance your chances for borrowing success. That’s why we prepared this brief guide to some of the key issues lenders consider before they offer a business loan or line of credit. It will also help you decide whether or not this is the right time to seek strategic financing to move your business forward.

For obvious reasons, it’s important for financial institutions to work with business owners who have a proven track record for repaying loans. That’s why lenders will carefully review your credit history before making a decision on your application for financing.

They will also look at your personal credit score. So take the time to carefully review all of this information before contacting a lender. And if there are any potential issues in your credit history, take action to address them before you apply.

You can receive one free copy of your credit report every 12 months from each credit reporting agency: Equifax, Experian, and TransUnion:

To get your free annual reports you can:

  • Go to:
  • Call: 877.322.8228
  • Write to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281
When a lender provides a loan to a business, the organization makes a significant financial commitment to the borrower’s success. In return, the lender will expect that the borrower also has a meaningful financial stake in the business. Some people call it “skin in the game.”

That’s why you’ll want to prove to a prospective lender that you are investing your own ‘capital’ in your business in terms of assets, cash or both. How do you do that? You provide an accurate, up-to-date balance sheet that provides concrete evidence of your level of investment in the business. 

So before you apply for financing, make sure that your balance sheets proves you have “skin in the game.” And remember: When a lender reviews your balance sheet, the facts will speak for themselves.
From a financial perspective, your ‘capacity’ is basically your ability to repay your business loan or line of credit. And one of the ways lenders assess your capacity is to analyze your monthly cash flow.  

In most cases, this analysis will clearly show whether it will be easy or difficult for you to make your loan payments on time while managing all of your other financial commitments.

Of course, this assessment will also help you and your prospective lender decide whether this is the right time to apply for a loan or line of credit. 

Borrowing for your business is always a big decision. And you want to make sure that it’s a smart move for you in the short term and the long run.
Lenders truly committed to the success of their borrowers need to have an in-depth understanding of the business environment. 

What’s the current state of the local economy? How much does that affect your business? Who are your key competitors? Are there any other factors that could have a major impact on your bottom line?

The answers to these questions help lenders understand your prospects for success and evaluate your future ability to repay a loan or line of credit.

But there’s another benefit as well. 

When lenders carefully assess your business environment, they gain insights they can use to offer guidance, resources and targeted financial solutions that will help you meet your challenges. And achieve your goals.
One of the most effective ways to prove your commitment to repaying a loan or line of credit is to provide collateral. Your collateral can then be used to cover or repay your outstanding balance if you are forced to default on a loan.

The simple fact is, many forms of collateral are used today in business banking, including receivables, real estate, inventory, vehicles, cash, and even some types of securities. 

Like “skin in the game,” it’s further proof of your commitment to being a responsible borrower. 

So think like a lender. And think about collateral before you apply for financing.
Before you make the decision to apply for a business loan or line of credit, you need to think about the basic borrowing questions that are on the minds of any reputable lender. 

Is your loan request truly aligned with your business strategy? Is the amount you hope to borrow “right-sized” for your goals? Will you be able to afford the loan payments given the current state of the economy and your business environment? 

In some cases, these questions may require careful analysis with help from professionals. But many business owners have the experience, good judgment and ‘common sense’ to answer them. 

So think through all the issues. Look at your financial statements. And review your realistic projections for the future. Then you’ll be able to decide whether it makes sense for you to pursue business financing at the present time.

Remember. Professional guidance is always available at ESL

If you’re thinking about getting a loan or line of credit for your business, here’s a simple suggestion:

We’ll help you analyze your situation, explore your borrowing options, and decide whether an affordable business loan from ESL makes sense for you.

It’s all part of our effort to prove that ESL really means business … to you.