If you’ve tried to get a loan from the bank for your business lately, you know it’s no slam-dunk.
The promos for SBA loans and loans for minority or women owned businesses sounds great, but when you get nose-to-nose with a banker it’s another story.
The promos for SBA loans and loans for minority or women owned businesses sounds great, but when you get nose-to-nose with a banker it’s another story.
Some of the reasons that make it seem so difficult are that
many lending officers feel that they’re lending you their money instead of the
bank’s.
They take almost personal responsibility for maximizing repayment.
They take almost personal responsibility for maximizing repayment.
Another is that they are particularly suspect of new
ventures.
Since 4 out of 5 or 80% fail within the first three years, many lenders require a three-year history of doing business.
Since 4 out of 5 or 80% fail within the first three years, many lenders require a three-year history of doing business.
Lastly, with all the bank merging and acquisitions that have
taken place the decision-making process has been moved far off-site from the
local branch.
Add all of these reasons up, and you had better be prepared to razzle-dazzle the banker.
Add all of these reasons up, and you had better be prepared to razzle-dazzle the banker.
Here are some tips to make lending you more attractive to
the bank.
First, start with a two-part presentation.
Initially submit a brief overview of your loan request. In this overview include:
First, start with a two-part presentation.
Initially submit a brief overview of your loan request. In this overview include:
- Excerpts from your business plan about your business concept, management team, and financial projections.
- Credit history overviews of the principals of your business.
- Brief answers to key lender questions of how much you’ll need, how you’ll use it, and how will you pay it back?
This should be a two to three page document and can be
considered a mutual qualifier.
It determines if the bank has any interest in lending you funds before you spin your wheels for hours in front of the loan officer.
You may want to end the document with your phone number so that the banker can call you back for an appointment or discussion.
It determines if the bank has any interest in lending you funds before you spin your wheels for hours in front of the loan officer.
You may want to end the document with your phone number so that the banker can call you back for an appointment or discussion.
If you’ve dazzled the loan officer sufficiently and have
obtained an appointment to meet with him, then it’s time to prepare the “big
guns”.
The ammo you’ll come prepared with will be three years of personal tax returns for all the principals of your company and the existing business.
Include credit reports on all principals, a complete and impressive business plan, and collateral and capitalization information.
The ammo you’ll come prepared with will be three years of personal tax returns for all the principals of your company and the existing business.
Include credit reports on all principals, a complete and impressive business plan, and collateral and capitalization information.
This sounds like a lot of information and will require
immense effort, but that’s why business ownership isn’t for everyone.
In addition to being prepared with all that paperwork be
prepared for any off-the-wall questions the lender might throw at you.
Take time to think about and originate a 30-second commercial about what you plan on doing and how it will benefit them and the business.
Take time to think about and originate a 30-second commercial about what you plan on doing and how it will benefit them and the business.
Be prepared to explain away any credit blemishes that show
up on the credit reports before the banker has an opportunity to worry about
them.
Be sure you’re able to show “cash-flow” understanding and awareness, without which any business is doomed.
Plot your most realistic estimated cash flow and bank account balance.
Make sure the bank balance never goes negative, and for a good touch show the loan repayment as a separate line item.
This shows the banker that you understand priorities. Collateral may be needed to satisfy the lender’s angst about repayment of the loan, and unfortunately most small businesses have too few assets to satisfy this need. Many entrepreneurs are forced to pledge personal assets such as their home to allay the bank. This may seem scary, and it is, unless you’re really sure of your success.
Be sure you’re able to show “cash-flow” understanding and awareness, without which any business is doomed.
Plot your most realistic estimated cash flow and bank account balance.
Make sure the bank balance never goes negative, and for a good touch show the loan repayment as a separate line item.
This shows the banker that you understand priorities. Collateral may be needed to satisfy the lender’s angst about repayment of the loan, and unfortunately most small businesses have too few assets to satisfy this need. Many entrepreneurs are forced to pledge personal assets such as their home to allay the bank. This may seem scary, and it is, unless you’re really sure of your success.
It sounds like a daunting task, but with some preparation
and determination it can be done.
It’s not as easy as all the ads you’ve heard, and just the fact that you are starting a “woman-owned” business won’t cut any ice with a banker, but all of life is a gamble isn’t it? After all, that’s why you’re an entrepreneur instead of a corporate lackey isn’t it? GO FOR THE GOLD!
It’s not as easy as all the ads you’ve heard, and just the fact that you are starting a “woman-owned” business won’t cut any ice with a banker, but all of life is a gamble isn’t it? After all, that’s why you’re an entrepreneur instead of a corporate lackey isn’t it? GO FOR THE GOLD!
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