The bank might reject the loan if they doubt the ability of the applicant to repay the loan. Thus, business owners should be careful when filing the application. The banks analyze different factors, including the business plan, marketing plan, and intended use for the money received. The failure to have a proper business plan is a prime reason that a company cannot get a loan from the bank.

Another important consideration is the collateral. Make sure that the collateral you list on the loan is one that is likely to be accepted by the bank.

Banks can reject loans if they do not trust the loan applicant and question the integrity of the business’s principals. Banks will also consider the loan history of the applicant, and reject applicants with poor credibility. The bank will always check the credit report of the company before they accept the loan application.

If the bank finds false information in the application of the loan, the loan will be rejected outright. The bank also declines loan applications if it finds that the company is involved in or supports any kind of illegal activities.

While there is no magic formula for obtaining bank loans, following these guidelines will put your business in the running.

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Due to the fact that some creditors and lenders require you to provide a personal credit check as part of their loan approval process, good personal credit goes a long way towards inspiring confidence and opens more doors to financing.

Your financial responsibility is gauged on the basis of your personal credit score, so don’t be afraid to cite it. A good personal credit score is considered indicative of how you will handle your company’s future obligations.

There are many factors that can affect your personal and business credit scores. As a business person aspiring to succeed, make sure to learn these factors and adopt a strategy that will boost your business in the long run.

What is the best way to organize your important company records? Keep in mind that record keeping must be systematic and easily accessible to you at all times. In order to make these documents quickly retrievable, be sure to file them in a fashion that is both logical and orderly. As computers have been known to crash, keep hard copies of all important e-mail documents on file.

What kind of records are the most important to keep and file? Here is a list of some of the most essential records it pays to maintain.

• Correspondence - Make sure to keep correspondence sent and received by mail, fax and email in hard copy form. File these documents systematically in relevant categories/folders.

• Contracts – It is vital to keep and file all contracts that you have signed, from real estate and equipment leases to sales or joint venture agreements as well as other relevant agreements.

• Accounting and bookkeeping records – Accurate accounting and bookkeeping records are vital to your company’s success because they afford you with a fuller understanding of your company’s status and are essential for tax purposes. In this category are income statements, balance sheets, sales and expense information, inventory, ledgers, cash flow statements and other relevant financial statements.

• Bank records – These records include all documents related to your company’s banking including bank reconciliations, bank statements, cancelled checks, deposit slips, notices from and to your bank and loan-related documents. Here, too, it is vital to file the documents in an orderly and systematic fashion.

• Marketing and advertising records – By maintaining marketing and advertising records you can accurately trace all advertising efforts made by your company to date. These records include marketing brochures, white papers, ads, banners and newsletters.

• Tax records – It is vital to perpetually keep track of all tax records. Such records include quarterly and annual federal and state income tax filings, records supporting tax filings, W-9 filings for independent contractors, and other tax-related documentation. Never allow yourself to be surprised by the demands of the various tax authorities.

Due to the credit crunch, refinancing an existing mortgage in order to obtain a more affordable mortgage payment is no longer an option for many homeowners. Loan modifications can help homeowners who cannot make their monthly mortgage payments but are prevented from taking advantage of other mortgage financing or payment options.

Are you eligible for a loan modification?

This actually depends on the company that services your mortgage. Most follow similar qualification criteria including the following: You have experienced a documented hardship or change in financial circumstances; you have missed three payments (90 days delinquent) or more; you own and occupy the property as a primary residence; you have not filed for bankruptcy. Also, you must prove that you are nor purposely defaulting to obtain a loan modification. The best way to find out how the program works is to contact your lender, inform them of your difficulty and obtain more information.

How to go about it

It is important to understand that you can only receive a loan modification with the lender or servicer that currently holds your mortgage. If you are not sure what this entity actually is, take a look at your mortgage coupon book and see who you send your mortgage payment to each month.

To avoid unnecessary delay and red tape, you may do well to consult with an expert in order to streamline your loan modification process.

The next step is to prove to the bank that it is in its best interest to modify your loan. Remember that your bank is in effect making a new loan to you after taking a loss on the first one. You must be able to prove to the bank that you are able to make your payments on the new modified loan terms.

Here are some of the prevalent loan modification programs: The White House/Treasury Loan Modification Program (visit FinancialStability.gov – Making Home Affordable); IndyMac Federal Bank Loan Modification Program (visit FDIC Loan Modification Program for Distressed IndyMac Mortgages); Federal Housing Finance Agency Loan Modification Program (visit FHFA Director Lockhart’s Statement on Loan Modification Program); Major Lender’s Loan Modification Programs (visit Preemptive Initiatives to Help Homeowners and Office of Homeownership Protection).

If you want to record the A/R on your balance sheet older than 90 days, you should set up a contra account for bad debt. In effect, this is “allowance for bad debt,” enabling you to put the account directly underneath the A/R on the balance sheet. Constituting best business practices, allowance for bad debt takes away a certain amount that you doubt will be collected.

When this item appears on your balance sheet, it shows to those who read it that you understand that not all A/R is collectible and that you are monitoring your account collections regularly. It is advisable to keep a running record of what may turn out to be bad debts so that you have a clear view of the situation at any given time.

While the full effect of the Consumer Financial Protection Bureau’s regulation and oversight remains to be seen, its overall aim is to protect the consumer by carefully examining and regulating various financial instruments, such as mortgage loans, credit card agreements, pay day loans, and private student loans.

The following is a brief rundown of some of the duties already slated for action:

• Creating more transparency in credit card documentation and loan contracts.

• Ensuring that consumers are able to get a credit score with their free credit report.

• Setting more stringent standards for lenders when verifying a borrower’s financial information and background.

• Creating more transparency and fairness regarding fees- from bank overdraft to mortgage pre-payment penalty fees.

It sounds good in theory. Yet much speculation is brewing that it will bring little financial relief to consumers and in the end will only raise the cost of financial transactions. Only time will tell.

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Statement of Capital

The statement of capital indicates changes in owners’ capital accounts. In the event that you are owner of the business, the capital account indicates how much of the company you own. When the accounting cycle ends, the net income goes to you. Before accountants make adjustments to an owner’s capital account, they must first clarify whether a company has a net income or net loss. This statement helps to understand where your company actually stands when it comes to income and loss.

Income Statement

The income statement lists and categorizes the revenues and expenses resulting from business operations during a specified period which could be a year, a quarter or a month. The difference between the stated revenues and expenses constitutes your company’s net income or net loss. In practical terms, income statements represent your company’s bottom line – whether you are making a profit or not. 

Balance Sheet

Your assets are actually equal to your liabilities plus the owners’ equity. The balance sheet lists whatever your company owns (i.e., assets), everything your company owes to creditors (i.e., liabilities) and the value of your ownership stake in the company (i.e., owners’ equity or capital).

The balance sheet does not indicate changes over time but it provides an accurate and extremely vital picture of your company’s financial position at a specific point in time.

Cash-Flow Statement

The cash-flow statement reflects all of the sources and uses of your company’s money during the required accounting period. Sources of cash may include revenues, long-term financing or sales of non-current assets. Uses of cash may include operating losses, debt repayment and increases in a current asset account.

The cash-flow statement is extremely important because it indicates if cash-flow is increasing or decreasing, thereby helping to prevent cash-flow problems.

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Here is a brief rundown of these laws:

• State Corporate Laws. As you are required to comply with the corporate laws of the state where your corporation was established, you will probably need to file documents with the state authorities and hold a board and/or shareholder meeting.
• State Securities Laws. Each U.S. state has a binding set of securities laws, so if you intend to offer company stock to investors residing in various states, you are required to comply with the securities laws in each of the relevant states.
• Anti-Fraud Laws. Anti-fraud laws stipulate that when you sell stock or a security to investors, the company is obligated to reveal all material information to potential investors. Be aware that it is illegal to omit the disclosure of material information.
• Federal Securities Laws. The sale of your company stock is equivalent to selling a security. The sale of securities is regulated by the federal government via the SEC. You may fall within an exemption for “private placements,” but due to the complexity of these laws it is advisable to consult with an attorney in this regard.
• Usury Laws. In the event that you are planning to borrow money, your company may be subject to usury statutes. As the latter limit the amount of interest that you can be charged, it pays to look into this issue.

Many homeowners choose this financing option because it is relatively easy to obtain, but there are numerous pitfalls as well. After all, the loan is being secured by the borrower’s home and a default could mean foreclosure.

• Before you decide to take out a home equity loan, here are a few things you should consider:
• Make sure that you can afford both the monthly payments of the of the home equity loan as well as other current obligations, such as a mortgage.
• It’s best to use the funds received from the loan to make improvements to the home or to invest in something that will increase in value as a result of the investment.
• Financial consultants recommend not borrowing more than 80% of the equity in the home. This means that the combined value of the mortgage and home equity loan should not be more than 80% of the sale price of the property.
• To avoid being scammed make sure you carefully read over the loan’s terms and conditions and where possible, consult a financial or legal professional.

While some of these organizations offer legitimate services, others are outright scams. If you are thinking of working with a debt settlement company, here are five warning signs that a debt settlement company is a scam. But the bottom line is, if it sounds too good to be true, then it probably is:

1. They claim they can dramatically slash outstanding balances. While some creditors may be willing to cut their losses on a bit of what’s owed, such a claim is unrealistic.
2. They state that they can stop calls from debt collectors and prevent legal action. In truth, debt settlement companies have no control over the debt collection practices of creditors.
3. They charge an exorbitant fee upfront. A legitimate service will base fees on the amount of money owed to creditors and it will be tied to the company’s performance.
4. They claim that your credit score will be unaffected. The truth is that a debtor’s credit score will be affected with the involvement of a debt settlement company (though the affect will be better than it would be if the debtor defaults outright.)
5. They tell you not to speak to creditors. The intention of this is to keep debtors from finding out about the true status of their accounts.