Access to Capital

Money your business is owed by another person or company that is considered "uncollectable," creating a bad debt. A debt becomes uncollectable when there is no longer any chance the amount owed will be paid. You must show tax agents and lenders that you have taken reasonable steps to collect the money, but were unable to do so. An example of a bad debt is if you loan money to a supplier or distributor for a business purpose, and they are unable to pay you back.

Financial assumptions and projections are a part of the business plan. Lenders and investors will review the research and calculations you make about projected profitability and your customer base. Be prepared to show how you made these calculations and assumptions.

The annual percentage rate (or APR) is the amount of interest on your total loan amount. You pay the full APR annually (averaged out over the term of the loan). A lower APR translates to lower monthly payments. When calculating your monthly payments on a loan, be sure to include the interest amount.

Debt amortization is the gradual reduction of debt, over a specific period of time, via a fixed repayment schedule. The payment should be sufficient to pay current interest and to eliminate the debt amount at maturity. Debt amortization plans can be a useful tool to help manage your loans and project your payment schedule.

An affiliate is a type of relationship between businesses in which one of the businesses owns some minority part of the other.

Accounts receivable (AR) refers to money that customers and other institutions owe your business. Usually receivables are organized by notes, statements, invoices or other written evidence. You should include your receivables on your balance sheet to maintain a record of how money is flowing in and out of your business.

Generally, every business needs some form of license or permit to operate legally. It's important to note that licensing and permit requirements vary depending on the type of business you have, where the business is located, and what government rules apply.

Your business plan is the comprehensive document that outlines everything about your business. The business plan is a living document, meaning that it should be reviewed and updated as your business output and needs change. Usually, the business plan projects your plans, projected debts and revenues, and growth for 3-5 years. The business plan will be required for most loan applications. Learn more about what you might need to collect for a loan application.