Whether it’s to start, operate, expand, or acquire a business, capital is required. Just how much is available, and what it will cost, depends on each business’s unique situation and the personal financial position of its ownership.
These two factors are so important that they find their way into the starting lineup of every loan application. Borrowers who have a good understanding of these requirements can more successfully present a complete package to their banker. I know many terrific commercial lenders, and while each of them outshines me in the virtue of patience, they do expect applicants to be respectful of their time.
That being the case, here are some loan application tips that borrowers can take to the bank.
- Check your credit – If your score is less than 650, the first step before applying for a loan is to improve your personal credit.
- Gather your documentation in advance – Print out all pertinent financial statements as of the last day of the prior month. You’ll need these to complete the application.
- bank (checking and savings)
- mortgage (all residential and commercial)
- retirement (Roth and Traditional IRAs, 401Ks, and SEPs)
- life insurance (whole life with cash value)
- marketable securities (CDs, stocks, bonds, mutual funds)
- automobile (car, boat, RV, ATV, plane, etc.)
- credit cards (and other lines of credit)
- tax returns (three years of personal and business)
- Prepare a business plan with financial projections – This is often the most daunting task for a borrower, but it doesn’t have to be with the help of an SBDC Consultant. A lender is looking for:
- how the loan proceeds will be used
- market research grounded in reality
- an assertive, but doable marketing strategy
- realistic forecasted income statements, balance sheets, and cash flows
- ownership and management resumes
- applicable licenses and contracts
Remember, bankers want to loan money. It’s how they get paid. A borrower’s job then is to ease the lender’s review process by presenting a clear and concise case for a) why the business needs the money, andb) that repayment on schedule will not be a problem.