Requirements for Loans

Transcription

1 Requirements for Loans Good day listeners, welcome to Financial Information month. Today we will talk about Requirements for BUSINESS LOANS. There are two sets of requirements that you must satisfy to get a loan from your bank or credit union. Firstly, there are General Requirements pertaining to yourself, and Secondly, there are Specific requirements pertaining to the transaction that you wish to undertake General Requirements 1. Verification of Income and Employment - Job Letter. The job letter must state: - Length of employment you should be employed for at least one (1) year at present job; Amount of your salary and frequency of payment; Your Position or job title; whether you are a full or part time worker whether you are a permanent or temporary staff For self employed customers the following will apply: - - You should produce your Current financial statement for your business. Failing this you should produce Inland Revenue Certified copies of Tax returns for the past three years; Verification of the source and amount of any equity contribution (where applicable); Credit reports or Banker s Reference letter; Statement of Affairs; Monthly budget analysis;

2 Lenders need an accurate declaration of your income to assess your potential debt servicing capacity. Lenders calculate what they call your Total Debt Service Ratio (TDSR)- Your TDSR is simply your total monthly loan repayments DIVIDED BY your total monthly income. As a general rule your TDSR should not exceed 40-45% of your gross income.

3 SPECIFIC REQUIREMNTS / TRANSACTIONAL REQUIREMENTS Vehicle Loans The following documentation is required for a vehicle loan: - - Valid drivers licence An invoice from the dealer or the seller of the vehicle; For used vehicles - an inspection report/certificate of road worthiness and an independent valuation stating: - - Cost or Value; - Chassis Number; - Engine Number; - Age/date of Manufacture.

4 SPECIFIC REQUIREMNTS / TRANSACTIONAL REQUIREMENTS Consumer Loans computer, furniture, etc Open bill from the dealer specifying : - Description and make of item to be purchased; - Cost of the item to be purchased Serial and Model number of item.

5 Good day listeners, welcome to Financial Information month. Today we will talk about the Requirements for HOUSE & LAND PURCHASE LOANS. In a previous broadcast we outline the General Requirements for Loans. We will therefore focus on the Specific / Transactional requirements. HOUSE & Land Purchase Loans : - The following documentation is required for House and land purchase Loans A Copy of survey plan/ site plan/ map sheet; A Copy of the land register Valuation of the property by a Qualified Land valuer/ Quantity Surveyor; with photographs of the building Letter from vendor stating agreement to sell Copy of vendor s Title Deed/Deed of Sale, if available You will be required to contribute at least 20% towards the purchase price of the property, and to give a Legal Charge over the property to be purchased. This has been just a brief outline of the requirements for House and Land purchase loans. Your bank or credit union may require more information and or documentation to assess your individual request.

6 SPECIFIC REQUIREMNTS / TRANSACTIONAL REQUIREMENTS House Construction The Bank will require:- Copy of survey plan/ site plan/ map sheet for the property Copy of approved drawings and Planning approval Builder s estimate of construction broken down in stages (Foundation, Floor slap, walls, roof, plumbing, electrical, etc) Bill of quantities or Costing by Quantity Survey Valuation of Land on which the house is to be constructed done by a qualified Land Valuer

7 SPECIFIC REQUIREMNTS / TRANSACTIONAL REQUIREMENTS HOUSE AND LAND PURCHASE The Bank will require:- Copy of survey plan/ site plan/ map sheet; Letter from vendor stating agreement to sell - letter must state sale price and the size of lot Photographs taken from the main road of the subject house to be purchased; Valuation of property done by a qualified Land valuer Receipts for payment of property taxes

8 SPECIFIC REQUIREMNTS / TRANSACTIONAL REQUIREMENTS Student Loans Letter of acceptance from University or College; Written confirmation of cost - it must be detailed for tuition, living expenses etc.; For loans on Draw-Down, evidence that the student is still enrolled in the program

9 Good day listeners, welcome to Financial Information month. Today we will talk about Requirements for BUSINESS LOANS. What are the requirements for business loans? First of all you must have a plan:- Business Plan / Business proposal; This is a plan outlining the business profile explaining your business to the lender, it should explain :- o Who you are o What do you hope to achieve? o What products and or services are you selling? o How do your products differ from the competition? o How will you market the products? o How will your competition react to you entering the

10 market? o Where will your business be conducted? o When do you expect to start the business? o How will you overcome the risks involved to achieve the desired returns? o Who will manage and run the business These are just some of the questions your business plan must answer to give the lender an understanding of your business. YOU MUST ALSO PROVIDE:- o Cash flow projections for at least the next twelve (12) months. FOR ESTABLISHED BUSINESSES:- Financial Statements for the past three (3) years Your business plan is your road-map to take your from start to finish. The starting point is when you invest your money and start-up the business, The finish is when you realize that profit at the end of an accounting period. However along the road to the finish line there will be obstacles, there will be other runners of the tracts (your competitors) wanting to overtake you, wanting to out-do you How will you react to the competition? How will you deal with the increasing cost of supplies? Will you simply pass on the increases to your customers? Will you lose your customers if you keep on doing this? Or will you find ways to achieve efficiencies in your business to cut down on cost? You must anticipate these issues and plan strategies to deal with them. ALSO,

11 Do not expect the lender to agree to finance 100% of the business needs, most lenders will only finance 50 66% of the finances required. You will be expected to contribute the difference. For example, if your business plan calls for capital of $100,000.00; you will be expected to contribute anything from $33, to $50, towards the project, depending on what collateral you are offering the lender to secure the loan. On the question of collateral, the standard collateral will be a Mortgage Debenture on the Fixed and floating assets of the company and the personal guarantees of the major shareholders of the company. If however, the company has no assets, you will be asked to provide personal assets to secure the borrowing. This has been just a brief outline of the requirements for business loans. Your bank or credit union may require more information and or documentation to assess your individual proposal.