These days, it may appear difficult to secure business financing. The truth is, it’s not as easy as it once was. But there’s still money out there; banks are in business to lend money. However, it’s more readily available to businesses of measured risk that can demonstrate repayment resources and good relationships with their bank. So your goal, as a borrower in today’s market, is to stand out from all the other companies looking for financing.
Try to anticipate every question that your banker will have. How much money do you need? How long do you need it? How are you going to use it? This combination of information and preparation is a powerful negotiating tool. So demonstrate your business savvy with a written proposal that describes your business objectives, management profile, and market and industry trends. Be sure to include risks, customer base, products, distribution channels, suppliers and competition. Show the bank your repayment sources, supported by business and personal financial statements, cash flow schedules and budgets. Tell your story in a way that highlights your successes and acknowledges your challenges.
A bank will also require a cash flow cushion should revenues decline or operating expenses increase. These projections are crucial to your business plan. Banks are cash flow and collateral lenders, and it’s common to require a guarantee from borrowers who may pledge assets to secure a loan.
There’s no business with no risk. You know that. And your banker knows it, too. If you don’t discuss risk, bankers may assume that you haven’t thought about it. But bankers do want to know if you have planned for major risks and how you would manage them. Having a Plan B can help convince the bank of your commitment.
It never hurts to demonstrate that you have good character and are a good risk yourself. You can show your good faith by moving all your personal and business accounts to your lending bank. If they’re giving you their commitment, give them yours. Make a point of getting to know your banker and your bank staff.
Lenders assess their risk by evaluating your time in business, proper ownership, lawsuits, liens, and bill payment history. So before your apply for financing, make sure you understand how your company appears to lenders, and put your best foot forward.