Schull Books

Small Business Loan Proposal

Business

Applying for a small business loan can be exciting and yet stressful at the same time. For the best results and to heighten your level of confidence, be prepared when you visit the lender you’ve chosen for your business loan interview. After you have your business plan prepared, start preparing for the loan by writing a loan proposal to present to the lender.

The loan proposal should state some crucial information, and many details, about both yourself and your business or business idea. It should state who you are, how much money you need and where the money will be spent, how you intend to repay the loan, and what you plan on doing in the even that you cannot repay the loan.

The following are key elements to include in your loan proposal.

1. Summary.

This should be listed first in your proposal, but will be written last. It should contain clear, concise, accurate, inviting information about your business or your business ideas. It should summarize how the proposed loan will be used, how it will be repaid, and how it will benefit your business. Remember your competition in the summary of your loan proposal, and point out features of your business that are different from your competitors.

2. Management Profiles.

The management profile section of the loan proposal should explain, most importantly, who you are. Be prepared to reveal everything about yourself and your experience. Have a current resumŽ included as part of the loan proposal, as well as a summary of your skills, qualifications, and other credentials for yourself, as well as for all other owners and key members of your management team.

3. Business Description.

It’s not necessary to state the same information mentioned in your business plan as in your loan proposal. However, you do need to present a solid description of the business. Include a brief history of the business in your loan proposal, and detail the current activities. If it’s a new business, explain the details of the business that will be developed. Your goal will to be to clearly demonstrate that you fully understand your markets, your competitors, and the industry, including current trends or risks and how you plan to overcome those potential dilemmas. If the loan is for an existing business, include literature that details your products or services, such as current sales sheets, brochures, or catalogs. Include attachments to your loan proposal for this section, such as letters from suppliers, customers, or other business references. Demonstrate through these letters that you provide excellent customer service, and that you pay back your creditors.

4. Business Projections.

Create at least two years’ worth of projected income statements and cash flow statements. Your projections should be clearly stated and, most importantly, realistic in nature. Generally, you probably won’t need to present the “worst case” or “best case” scenario unless the lender asks for you to write the projections that way. You should, however, be prepared to answer questions pertaining to what you’ll do if some of your projections don’t work out as planned. For example, if you anticipate obtaining a large, new contract or customer based on improvements made with the business loan, and that contract never goes through, it could change your loan proposal projections drastically.

5. Financial Statements.

Your loan proposal should include both business and personal financial statements. Be aware that the lender will fully analyze the history of your financial statements, calculating all ratios. Be prepared to point out any significant trends you’ve shown in an introductory paragraph.

6. Loan Purpose.

One of the most important parts of your loan proposal is a detailed description of how you will use the loan proceeds. Have a good understanding of the type of loan that you need, and remember to include the proceeds of the loan in your cash flow projections, as well as the interest in your projected income statement.

7. Repayment Plans.

Repayment plans should also be stated in your financial projections section of the loan proposal, but details of repayment plans should be detailed separately. Propose the terms you want, and prepare for negotiations with the financial institution. The lender will consider a number of factors as they review the overall risk of lending you the money. Understandably, this will impact the repayment terms that they are willing to offer for your business.

Especially if your credit is good, and even if your credit is not so good, remember that in your loan proposal, you are offering the bank a deal that will make them money. Don’t go in asking the lender for an “allowance.” Instead, enter the interview with your loan proposal objective in mind; namely, focusing on how much money you’ll need, and remove the idea of going into the meeting wondering how much they’re willing to lend. Never go into a meeting asking for a loan, wondering whether or not they’ll lend to you. If this first lender won’t approve your loan proposal, have confidence that a different will.

2 Comments August 1, 2009

Teaching Money Management

Money Management

Now more than ever it is vital that we begin teaching personal finance so our youth are prepared for the financial realities of the real world.

Teaching money management skills that are focused on a ‘practical’ financial education will help to reduce debt, increase savings and ensure the financial security of millions around the world.

In today’s age, it is more important than ever that parents start teaching money management skills to their children. Teaching personal finance is not done in most schools due to budget restrictions and other red tape. Schools have a lot of other required coursework they must teach due to the ‘No Child Left Behind’ and teaching financial literacy is not part of that bill.

Looking at the statistics it is apparent the majority of parents do not have enough knowledge to teach financial literacy to their children. In fact, many parents today are experiencing financial troubles and wish they had someone that was skilled in teaching them personal finance matters. Parents who participate in home based businesses train their children frequently in the skills of finance by using the business as an example.

Teaching money management skills in today’s age is critical. There simple way you can begin teaching personal finance to your children so they are prepared for the real world! Even if you have made financial errors yourself there are teaching financial literacy resources available to help give your family a big advantage.

Three Tips to Teaching Money Management Skills Teaching personal finance will help your children to achieve financial security and can give them an advantage that they will benefit them throughout their life. Check out the list below to discover the top ways to teaching money management skills.

1) Financial Literacy Lesson Plans – Today there are financial literacy lesson plans available that help parents that want to be teaching money management skills to their children. Make sure the personal finance curriculum plans you choose have been designed by a team of experienced professionals. Teaching financial literacy is much more effective when the financial literacy lesson plans were developed by a team of financially successful entrepreneurs and teachers that have a track record of financial literacy lesson plan development experience. Teaching personal finance curriculum that combines top teachers with business leaders will put you immediately on the right track.

2) Communication – The backbone to teaching personal finance effectively starts with communication. Today’s youth are not focused on just “money”. It’s what money ‘allows them to do’ that motivates our children to learn about personal finance. When you teaching financial literacy be sure to ask about their personal dreams and find out how they want to live their day-to-day life. Then relate their aspirations to how having a solid understanding of money can help them reach their goals faster. You will be pleasantly surprised at how many youth want to learn about money when it your teaching money management skills that focuses on lifestyle.

3) Entertaining – By the time the average student graduates from high school they may have been in over 10,000 classes. That is why it is important that you are teaching personal finance in a way that makes you stand out from the thousands of presentations. Teaching money management skills in a way that engages the students will keep their interest. Teaching financial literacy in a fun, entertaining way will help them internalize financial literacy lesson plans so they benefit from this knowledge throughout their life.

Leave a Comment July 31, 2009

International Financial Reporting Standards

Financial Report

International Financial Reporting Standards are standards and interpretations adopted by the International Accounting Standards Board.

Many of the standards forming part of International Financial Reporting Standards are known by the older name of International Accounting Standards. International Accounting Standards was issued between 1973 and 2001 by the board of the International Accounting Standards Committee. In April 2001 the International Accounting Standards Board adopted all International Accounting Standards and continued their development, calling the new standards International Financial Reporting Standards.

Objective of financial statements

the framework states that the objective of financial statements is to provide information about the financial position, performance and changes in the financial position of an entity that is useful to a wide range of users in making economic decisions.

Underlying assumptions

The underlying assumptions used in International Financial Reporting Standards are:

• Accrual basis – the effect of transactions and other events are recognized when they occur, not as cash is received or paid.
• Going concern – the financial statements are prepared on the basis that an entity will continue in operation for the foreseeable future.

Qualitative characteristics of financial statements

The Framework describes the qualitative characteristics of financial statements as being:

• Understandability
• Relevance
• Reliability
• Comparability

Elements of financial statements

The Framework sets out the statement of financial position (balance sheet) as comprising:

• Assets – resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
• Liabilities – a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
• Equity – the residual interest in the assets of the entity after deducting all its liabilities
and the statement of comprehensive income (income statement) as comprising:
• Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or reductions in liabilities.
• Expenses are decreases in such economic benefits.

Recognition of elements of financial statements

An item is recognized in the financial statements when:

• it is probable that a future economic benefit will flow to or from an entity and
• when the item has a cost or value that can be measured with reliability

Measurement of the Elements of Financial Statements

Measurement is how the responsible accountant determines the monetary values at which items are to be valued in the income statement and balance sheet. The basis of measurement has to be selected by the responsible accountant.
Accountants employ different measurement bases to different degrees and in varying combinations. They include, but are not limited to:

• Historical cost
• Current cost
• Realizable (settlement) value
• Present value

Concepts of Capital and Capital Maintenance

Concepts of Capital:

Financial concept of capital, e.g. invested money or invested purchasing power means capital is the net assets or equity of the entity. A physical concept of capital means capital is the productive capacity of the entity.

Concepts of Capital Maintenance and the Determination of Profit Accountants can choose to maintain financial capital in either nominal monetary units or constant purchasing power units. Physical capital is maintained when productive capacity at the end is greater than at the start of the period.

The main difference between the two concepts is the way asset and liability price change effects are treated.
Profit is the excess after the capital at the start of the period has been maintained. When accountants choose nominal monetary units, the profit is the increase in nominal capital. When accountants choose units of constant purchasing power, the profit for the period is the increase in invested purchasing power. Only increases greater than the inflation rate are taken as profit. Increases up to the level of inflation maintain capital and is taken to equity.

Leave a Comment July 27, 2009

FHA Loan Requirement

FHA Loan Requirements

FHA loans have allowed Americans to borrow money from the lenders for the purchase of a home. FHA does not make loans. Rather, it insures loans made by private lenders. These loans can also be obtained despite a poor credit history. The requirements for these loans are not strict and they can be got quite easily from the lenders. The interest rate is also lower than other type of loans.

Requirements for the FHA loans

1. Any past bankruptcy must be at least 2 years old,

2. You should have had a very good credit for at least 2 consecutive years following the past bankruptcy.

3. You should be able to show steady income for at least three years. The lenders will then be more confident about your repaying abilities,

4. Foreclosures should be at least three years old. This is a major requirement in getting a FHA loan,

5. You should be able to make a 3% down payment,

6. You need to have a valid social security number so as to prove that you are an American citizen.

But the FHA loans also have a disadvantage which can make them a poor option for certain people. This is because the lenders have loan limits depending on the county. Thus, the borrowers might not be able to get the amount of loan they really require to get the house. Moreover, Private Mortgage Insurance is required regardless of the amount of the down payment. This is another disadvantage of the FHA loans. There are lots of lenders giving the FHA loans. You need to do extensive search and compare offers by various lenders to find the best lender.

Leave a Comment July 14, 2009