The Purpose Of Banking- Risk vs. Reward

In preparing and presenting a loan proposal, it is vital that you step into the lender's shoes and scrutinize your plan not only with objectivity but also with the lender's subjective standpoint in mind.

All investors and lenders will desire a reward equal to or greater than the level of risk. In order to make banker believe that the loan amount is safe and not risky, you should be aware of your proposal and you must know the answers with details that will convince him. The less you know, the riskier it seems, whether it is or not.

There are many variables that make up the whole risk equation, but the single largest factor weighing on the lender's mind is the amount of owner's commitment (or collateral). The more personal assets that you commit, the lower the risk as far as lenders are concerned. Higher the value of security, higher will be your chances of getting approval.