Bizdoms®: The Banker's View:
Applying for a Business Loan  
By SmartSamantha and Donna Kain, Vice President, State Bank

Applying for a business loan can be an intimidating process, but if you re prepared, you have a much greater chance of success. 

Here s a rundown of what bankers are looking for from you when you re applying for a business loan.

First Impressions

First, show your passion and belief in your business.  Otherwise, how can you expect the banker to believe in you?  In this situation, you are a salesperson you re selling yourself and your business.  Treat the meeting the same way as you would any other sales presentation:  be prepared, professional, friendly and courteous at all times.

And be patient.  The banker will ask you lots of questions, but this helps them understand you and your business. 

The Loan Amount

You ll need documentation to show how you came up with the amount of the loan you are requesting. 

• If the loan is for an equipment purchase for your new cool idea, you ll need the invoice or quote for the equipment being purchased. 
• If it s for leasehold improvements (office space/building improvements), have an itemized list of all costs associated with the build-out. 
• For a line of credit, give details of specifically what it will be used for and how and when you will be able to repay the loan.

Provide Documentation and History

• If you are starting a business, you ll need a complete, well-thought-out business plan with realistic projections for a five-year period. Yes, you need all those P's of your Ideas in a professional format.
• Plus, you need a proven track record.  If you re starting a new business, your previous work experience is very important.  Be sure to show how you can transfer those skills learned on a previous job to successfully running your own business.  If you have an existing business, the banker will expect to see profits - not losses - from your business.  If you have losses or minimal profits, be prepared to explain - and My accountant tells me not to show a profit is not an acceptable reason.  The banker will also be looking for sufficient cash flow to service the loan. You need to be able to show them the money of your idea!

Can You Pay It Back?

• Your personal financial situation needs to be strong.  Are you prepared personally to cut back on spending in order to provide cash to run the business?  The banker expects to be paid before you pay yourself. 
• If your debt situation requires that you need a significant non-reducible salary from the business in order to meet your personal obligations, you ll need to find a way to reduce your debt before applying for the business loan. 
• Be prepared to personally guaranty the loan.  You ll need to offer some items of value to back it up, even if it has to be your personal assets.  You may be asked to provide an additional guarantor (someone to back you up) if your application has some weaknesses.

And also have a backup plan.  The banker would prefer that you have already thought through the worst case scenario.  You need to show the money of your idea to get the money for your idea!

 BIZDOMS® are a registered trademark of SmartSamantha and for informational purposes only and are not intended to provide any legal, financial or other advice.  You should consult with a professional in such fields before acting on any information on this or any other website.