Entrepreneurs and small businesses with few assets may find it hard to secure a traditional loan. Other business owners may not be able to provide the confidence that lenders seek to ease their worries that your business isn’t shaky and the loan won’t get repaid. So when you approach a lender, it’s just as important to understand the reasons on which loans are made as it is to stack up your financials and business plan. So what are lenders looking for in a potential loan applicant? Here’s what you need to know.
Loan officers are looking for you to show that you have sufficient assets, financial reserves and personal collateral to endure business fluctuations and still pay off your loan. Also, if you are an established business they will need you to show that you have solid cash flow, sufficient to repay the loan. Don’t be surprised when you are asked to provide evidence of your track record of profitability and success in a similar business endeavor. It’s your job to prove to the banker that you are a creditworthy business owner. It’s kind of like a job interview, if you can see the type of candidate the employer is looking for, then anticipate questions accordingly.
If your chosen lender decides that you aren’t the right candidate for a traditional business loan, you still have options. The Small Business Administration doesn’t lend businesses money, instead, these SBA programs take the risk away from the banks and encourage them to make loans to small business owners by guaranteeing part of the loan.
The key to all this preparation is a solid business plan, good personal and business credit, and some expert help. Wise Business Plans not only provides businesses with up to date market forecasts and comprehensive industry data. We also help clients become better prepared when it is time to step into the loan officers office.