Many new companies in Colorado inevitably run into the need for business loans. An injection of cash can help a growing enterprise keep up with rising demand or acquire new equipment or real estate. While startup companies generally lack the financial track record required to get a bank loan, the Small Business Administration and online lenders could provide access to money. Choosing the right amount to borrow without overextending a youthful business represents the crucial first step when seeking a loan.
When calculating what to borrow, a business owner needs to calculate the debt-service coverage ratio. This figure arises from looking at how a loan payment would impact average cash flow. The payment level that does not put excessive strain on operating cash indicates how much a business can comfortably pay every week or month.
A loan-performance analysis also informs the business owner of the potential rewards of financing. This calculation projects the rise in revenue that the financed upgrade should produce. The figure indicates whether the loan would pay for a worthwhile investment. If a loan appears to be a viable choice, then a business owner needs to consider the interest rate and loan fees carefully before borrowing.
An entrepreneur about to take out a business loan to expand operations or buy commercial real estate might benefit from legal advice as well. A lawyer familiar with business law could review documents like promissory notes or purchase agreements. This legal analysis could inform a person about hidden liabilities. To protect a person’s interests, an attorney could propose changes to the contract. Negotiations led by an attorney might produce a deal that imposes less risk on the business entity.