Note: This is a guest post by Bert Seither, Director of Operations at Corporate Tax Network. We’re honored to have him on the blog:
When borrowing money, a reasonable interest rate is sometimes vital for the success of a business.
However, obtaining business loans can sometimes be a challenge. Since you’re competing against other businesses for the bank’s money, it’s important you make sure all of your financial bases are covered BEFORE you approach a bank for a loan.
To increase your chances of being approved, you need to be prepared and know what the bank is going ask of you — before you meet with the lender. Here are a few tax tips to increase your chances of approval, as well as get better rates and terms:
1. Make sure previous year’s tax return was done properly
If there are material misstatements (mistakes) they are not going to rely on the tax return and will ask for a CPA to then re-prepare it, consequently hurting the business owner’s credibility. If you’re a new business, and don’t have a previous year’s business return to show them, you need to have interim financial statements as well as cash flow projections for a minimum of three years. This is an absolute must because lenders need to assess the level of risk.
2. Banks look for consistency in business plans and methods.
If you don’t have the patience to write out a business plan, and identify where your business is now, what your goals are, and how you’re going to achieve those goals, lenders think you won’t be able to run a business. They’ll think you are a high-risk borrower. And if they even give you a loan, it will likely have high interest rates. Banks are looking to see that you’re grounded, realistic and dedicated. Before they’ll give you business financing, they want to know how you are planning on spending their money, and how you plan on paying them back.
3. Lenders calculate ratios based on tax returns
To have the right calculations, the tax return must be prepared correctly. For example: When somebody deducts the home office expense, the bank will add that back as income, which helps when trying to get a loan. It’s important you choose which deductions to take and when to take them.
4. Free corporate tax webinarWhen looking for extra capital, it’s important you have a qualified tax professional on your team so they can make sure all of your documents are in order before applying for business loans. Corporate Tax Network provides business owners a unique opportunity to understand the tax implications of running a business through a free webinar. Here you’ll learn how to:
- Find commonly missed deductions
- Receive 2011 tax credits
- Develop tax strategies of the wealthy
- Choose the best tax structure for your business
- Avoid an IRS audit
- Position your tax returns for business loans
You can register for this FREE webinar here: http://www.corporatetaxnetwork.com/lendio
About the Author
Bert Seither is Director of Operations at Corporate Tax Network, a full-service CPA and Accounting firm that specializes in helping small to medium sized businesses position their taxes, financial statements and business plans for business loans. Corporate Tax Network has accountants, CPAs, and Enrolled Agents for all 50 states in the US.