Strong financial statements aid Tootsie Roll Industries in the submission of a loan package to increase companys total liabilities by 10%. A loan package requires research to ensure that all details are met as well as a ratio analysis of liquidity, solvency, and profitability ratios. The company must justify the reason for the need of the loan, such as expansion, inventory purchases, or debt retirement. Finally, Tootsie Roll Industries must provide an explanation of how the company plans to use the proceeds from the loan as well as how loan approval might affect the company. A loan package is the collection of documents associated with a specific loan application (Loan package, 2012).
Loan packages are instrumental in the startup and growth of many small businesses because it provides initial funding and support. The process begins typically with a cover letter, which includes the business background, business nature, loan amount, loan purpose, repayment terms, loan benefits, business profile, and management experience (U.S. Small Business Association, n.d.). The borrower must provide proper documentation including Form 4: Application for Business Loan, Form 4-a: Schedule of Personal History, Form 1624: Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion Lower Tier Covered Transactions, and Form 1846: Statement Regarding Lobbying (U.S. Small Business Association, n.d.).
Lenders and borrowers must work together in order to apply for the most applicable loan to the business. According to U.S. Small Business Association (n.d.), Borrowers should provide complete financial statements for the last three years including balance sheets, income statements, and a reconciliation of net worth as well as a current (no more than 90 days old) interim financial statement (Business Financial Statements). The borrower must also provide projections to the creditor. The projections predict a year out or the positive flow of cash, which includes earnings, expenses, and the reasons behind the projections (U.S. Small Business Association, n.d.).
The borrow should include documentation to assist in the predications such as contracts of lease proposals, franchise agreements, purchase agreements, articles of incorporation, plans, specifications, copies of licenses, letters of reference, letters of intent, and contracts partnership agreement (U.S. Small Business Association, n.d.). If the borrower does not provide the proper documentation to the creditor, then the borrower is not likely to receive loan approval. Financial statements are key supporting documents to the loan package.