Getting a bank loan: Part one
In light of the recent financial crisis and the resulting Great Recession, there is a pretty good chance your small business hasn’t made a loan request to a bank in a while. Now that it looks like the recovery is real, you’re going to need access to capital to take advantage of opportunities that are presenting themselves. For most small businesses, that capital comes from a bank loan.
Consequently, this is a good time to revisit a few banking relationship fundamentals that we’ve talked about in the past.
If you’ve never asked a banker for a loan, or if it’s been a while, you’ve got some homework to do first. But don’t worry; it’s not complicated. You probably know more than you think because getting a bank loan is a lot like qualifying a prospective customer. For example, you want to know:
- Who makes the loan decision?
- What information do they need?
- What motivates them?
Just like in selling, you have to do your homework. Here’s how this works with banks:
Who decides?
You have the right to ask who is going to make the decision on your loan. Can your loan officer decide, or will it go to the local loan committee or somewhere else?
Why do you care? The more people involved in the process increases the scrutiny of your deal, which means more questions and more time from proposal to answer.
What do they need?
Your banker will ask for personal and business financial statements. They might accept last year’s business numbers, but they could also ask for an interim report.
Depending on the size of your request and what you’re using the money for, they might ask for a business plan. If the loan is for real estate, a current appraisal will be required.
Don’t give the bank more than they ask for, but give them everything they ask for. And the quicker your banker gets information, the quicker you’ll get an answer.
How do they want it?
Ask your banker what information can be presented verbally, what needs to be in writing physically and what can be sent electronically.
Whether you’re borrowing $5000 for a computer, or $5 million to buy out a competitor learning as much as you can about what your bank needs will significantly improve your chances of getting a loan.
Write this on a rock... Qualify a bank like you do customers, and be sure to do your homework.
Jim Blasingame, Creator/Host of The Small Business Advocate Show
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