Too little attention is given to laying the foundation for getting a loan. Most of us don’t think about a loan until we really need one. But applying for a loan in today’s environment is like looking for a job in a down job market. We will have fewer choices, and if you haven’t done your homework, it will show. Same goes for looking for a loan when the market cycle is tight, as it is now. You’ll have a much better chance at success if you are confident, and if you’re confident you will probably be more creative and work harder. Just like looking for a job, the time to build a good foundation for getting a loan is when you don’t need one. Try to clear all the clutter away and focus on these steps for building a foundation for your next loan request.
Develop a relationship with a local banker in a local lending institution. Go to a small community bank or other lending institution that advertises that it serves small businesses. With a smaller local institution, you’ll have a better chance of talking directly with the person responsible for making the loan decision. If possible, open up a checking, or other accounts. Get to know the local small business banker or loan officer. Tell him or her a little bit about your business. You wouldn’t try to make a sale or get a new client without taking some time to be persuasive and sell the benefits of your product or service. The same concept applies when asking for a loan, make sure to sell yourself, your business and your credibility.
Clean up and improve your credit report and credit score. You may think there’s nothing you can do to improve your score. But that’s not always true. Check your record, personal and business credit, to make sure your credit report does not have any errors. If it does, get them corrected. A good example of something on a credit report that most folks don’t think is bad, so they don’t get it corrected, is closed accounts still showing open balances, get them off of there. Second, pay down on your credit cards or other accounts. If you are maxed out or near to maxed out on the credit limit, it affects your credit rating negatively. Third, make sure you have a business credit record. A surprising number of small businesses do not have any business credit record. If you don’t, open a business checking and trade account. At any rate, the time to work on your credit ratings is before you need a loan.
Last but not least, have a professional, comprehensive and up to date business plan. Don’t think that any banker, loan officer, or investor can’t tell the difference between that and the one your cousin drew up for you last week. The graphics, font, and paper might not matter as much as the information inside, but the presentation of the data is in competition with all the other business investment opportunities that are currently on that banker’s desk. It’s your job to make sure your company’s needs can rise above the competition and secure the funds that will help propel your business into the future.