advertising supplement to the Zimbabwe independent JANUARY 29 TO FEBRUARY 4, 2016 B7
INSURANCE
Loans boost money supply growth A LOAN is the act of giving money, property or other material goods to another party with the expectation of being repaid. Loans are important because they help grow an economy’s supply of money. They foster competition, introduce products and expand businesses. Investors should always consider the loans a company has made when analysing an opportunity. And borrowers need to fully understand the terms of any loan they accept. In exchange for a loan, the lender usually expects to be repaid the principal with interest. Loans can come from virtually anyone, from individuals to corporations, and consumers take them for many reasons – to buy a car, to open a business, to go to college, just to name a few. Credit card companies are essentially issuing cardholders loans used to make purchases. Bond issuers, including governments and corporations, are accepting loans when they issue a bond to fund a project or activity. Banks use loans as a primary source of revenue, generated by the interest they charge. Loans can be for a specific time or amount, or open-ended up to a certain ceiling. Terms of a loan, such as how long the borrower has to repay it, are usually put in writing so both parties know where they stand. If a loan requires collateral, or property the lender can seize if the borrower stops making repayments, that’ll be specified, as well. For example, mortgages typically use the house as collateral. Answer these seven questions before applying for a loan for your startup. Securing a startup loan can be the vital first step toward a dream come true. But there are seven questions any budding entrepreneur needs to have answers to before sitting down with the lender.
What makes business successful?
What will this company do better than any other company? What is the competitive advantage that will make this particular company sweep in and knock the other guys out of the saddle? Showing the lender you have a realistic plan for getting customers and market share, which in turn lead to a healthy profit, is the crucial first step.
worth of personal bank statements are but some of the documents typically required before a lender considers an application. Double-check the lender’s list of requirements, take the time to organise it neatly in a binder and have someone else look over the business plan and other papers to catch any mistakes that might give an unprofessional impression.
What happens if you die?
Loans are important because they help grow an economy’s supply of money.. mentation beyond the business plan. Business permits and licences, a franchise contract,
professional accreditations, lease paperwork, three years' worth of tax returns and one year's
Unpleasant as the thought may be, accidents happen. It is important to be aware that business loans do not necessarily die along with the entrepreneur if the worst occurs. This means the bank may go after the life insurance policy that was intended to keep the roof over your family’s head. Seek professional help from an advisor who specialises in small business insurance, and review the family insurance situation carefully with every "whatif" scenario. — Investopedia.
Business Premises to let
Why do you need the money?
The loan should have a clear place in the game plan with a specific number of dollars filling a capital gap required to purchase A and B, which in turn are necessary to achieve D results. If it is a piece of machinery, have a price quote in hand. If it is inventory, have a quote for that. The key is to show the lender you have taken the time to research the real costs, and you have a concrete plan for using the loan to generate profit down the road.
How will the loan be repaid?
Getting the money back, with interest, is the first and foremost concern for the lender. This is why it is important to have a clear idea of how the loan should be structured to ascertain timely repayments without interfering with the overall progress of the company. Loan terms are always negotiable, as long as they are determined before the papers are signed.
Are you trustworthy?
Since the company does not have a track record of its own yet, the lender has to look at the applicant's personal history to predict repayment reliability. A single black mark can cause an otherwise excellent loan application to be rejected. On the flip side, can you show a history of consistent mortgage payments and credit accounts in good standing? If so, use that to your advantage, and ask for a good interest rate since you are more of a "safe bet" in the lender's eyes.
Do you have any collateral?
It may make sense to think a US$20,000 loan to buy a machine is so simple as to have the machine be its own collateral. Not so. If things go south, a liquidation sale is unlikely to recover the full dollar-for-dollar value, which is why lenders typically only count a fraction of the asset's value for collateral purposes. You may be asked to put up additional personal property as collateral to cover the gap, which is why it is good to have a written value assessment.
Do you have all papers in order?
A business loan package needs a lot of docu-
Business Premises available at 1 Kwame Nkrumah Avenue, Block 3, Harare. Offices or full block available. For more information, contact: Kington on +263-772 499 039