Investments and loans in the past depended a lot on the gross report of a company’s business fundamentals represented concisely as a fact sheet. It helps the prospective investors to have a strong insight into the company’s real standard. Depending on the reputation in the tear sheet, the potential investors sanction small business loan to the appropriate clients.
A tear sheet is the mirror of a company’s status
So, a tear sheet is a collection of information on the company’s finances. Out of these documents one can make an estimation of how the company is doing and if it is considered viable for a loan.
The balance sheet is a summary of the company’s finances
The balance sheet is one of the most effective and productive ways to see how a company is financially doing. It consists out of two parts or rather sides: the assets on one side and liabilities and shareholders’ equity on the other side. And it is quite clear from the title of this sheet that the sides need to balance out.
First part of the income statement
For a particular time period of the company’s finances you can look at the income statement, which is also composed out of two sections. The first one is the operating section, and it deals with revenues and expenses from the regular every-day business of the company in question.
Second part of the income statement
And the second part is the non-operating section deals with revenues and expenses that do not have a correlation with the regular business of the company.
Cash Flow gives information on the cash going in and out of the company
The cash flow is the third fundamental part of a tear sheet. And as the title says it gives information on the cash flow of a certain business. To be exact – it gives the net amount of cash and cash-equivalents that flow in and out of the company.
Prepare all the documentation
Three documents discussed above are the first thing that a lender is going to look at when a company applies for a loan. So make sure that you have all of these and that it is in. The best advice for somebody who is looking to get a loan for their company is to be prepared in advance with all the needed documents and to be responsible.
Try to make a good business plan
You will need to show to the lender that you are viable to return the borrowed money and that you can be trusted, so one of the things that you can do is make a good business plan. This will take you some time, but there are helpful tools online that you can use for free and build the plan part by part.
Some other advice for you to consider
You can also give the lender an extensive explanation of how you are planning to use the money and how your company is going to profit from it.
The questions a business owner needs to ask the lender
A good thing to do is to ask the lender about all of the things that might be unclear to you. The interest rate is usually the first thing that comes to mind, and this is very important, but there are other things you need to consider. You can ask in what period of time are you required to return the loan or what the terms are, or is there a specific list of things that the money can be used for.
- A tear sheet is a slang term.
- A tear sheet is composed of three parts.
- The balance sheet summarizes the finances of the company.
- The assets column and the liabilities column need to balance out.
- An Income statement shows the lender the company’s financial records at a particular time.
- A positive cash flow statement means the company is doing well financially.
- Business owners need to prepare the documentation carefully.
- Thinking in advance and being responsible is the best thing a business owner can do.
- Preparing a good business plan takes time.
- A business owner needs to know what the interest rates for the loan are.
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