18 Business Loan Requirements
4 – Accounts Receivable Aging and Accounts Payable Aging
Depending on the type of loan and the financial institution, the lender may ask to see your current accounts receivable (A/R) and accounts payable (A/P) aging reports. Essentially, this is going to document how well your business collects on payments owed for goods and services and subsequently, how you handle your own bills.
So for instance, with the A/R report the lender is able to see things such as overdue payments, the length of time any payment is overdue, and the efficiency with which you are able to collect money owed. The reason they want to see this is because they need to know first off if you are able to collect money and if not, what might be underlying this. Too many past due accounts suggest a problem when it comes to the credit you’re extending customers and your ability to get them to pay off their debts. On the other hand, a few overdue accounts point to a system that seems to be working for you.
On the flip side, we have the A/P report. This is an accounting of your own bills. The same logic applies. If you are past due on too many accounts, then perhaps there are some issues that need to be addressed. If delinquent on numerous accounts, this could very well be a red flag to a lender who is obviously going to be concerned about your repayment ability.
At First Union, we want to do everything we can to help you get the funding you need, whether in the form of a merchant cash advance or a short-term loan. The key is to be prepared and have all of the pieces in place prior to applying. It is always a good idea to look into you’re A/P and A/R reports and addresses any issues you might see first, thus giving you a better chance of qualifying!
You’re reading Part 4 in our 18 part series – 18 Business Loan Requirements
18 Business Loan Requirements 15 - Business Credit Score Different from a personal credit score, your business credit score is focused on precisely what—your business. This means it takes into account your timelines as far as payments to creditors and suppliers....
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