Equity:

Financial institutions want to see a certain amount of equity in a business. Equity can be built up in a business through retained earnings or injection of cash from either owner or investors. Most banks want to see that total liabilities or debt of a business is not more than four times amount of equity. A business owner usually must put some of her/his own money into business. The amount an individual must put into business in order to obtain a loan is dependent on type of loan, purpose and terms.

Collateral:

Financial institutions are looking for a second source of repayment, which often is collateral. Collateral are those personal and business assets that can be sold to pay back loan. Every loan program requires at least some collateral to secure a loan. If a potential borrower has no collateral to secure a loan, she/he will require someone to guarantee loan. Otherwise it may be difficult to obtain a loan.

When you want to borrow money you must be prepared to answer these questions:

Can business repay loan?

Can you repay loan if business fails?

Does business collect its bills?

Does business control its inventory?

Does business pay its bills?

Does business control expenses?

Does business have a profitable operating history?

Are sales growing?

You may freely reprint this article provided author's biography remains intact:

Q.What kind of loan is best for investment?

A.A great way to have extra insurance on your vacation home or rental property is to get a Pick A Payment or Vacancy Protection Loan. This type of loan allows buyer to choose one of four payment options each month: 30-year payment, 15 year payment, interest only payment and minimum payment. Of course, whenever possible 30 year or 15 year payment are best choices for long term. In a pinch, however, you can lower payment and pay off debt or handle other financial issues. This is best way to protect your investment cash flow.

Q.How can I move forward and purchase a second home?

A.Make sure you have thought everything through about this type of purchase. Ask questions, do research, have a plan and be prepared. When you are ready first step is to be pre-approved or pre-qualified before you even begin looking for a home. Find out if you can get a loan and what kind will work best for you. Once you have consulted with a loan officer at a reputable mortgage company you will be well on your way to an investment in your future.