Despite the recent bank bailouts, credit is still tight for small business owners. How can you improve the chances of obtaining a bank loan for your small business? Specifically, you will need to gather documents to provide the lender with a complete picture of your situation.
What documents do you need? The list may vary slightly from bank to bank, but typically you’ll be required to produce these five items.
- Business plan. Draw up a blueprint for business operations for at least one year. Demonstrate how you expect to use the loan proceeds.
- Cash flow projections. The lender will expect a detailed analysis of what you expect to earn and the manner in which it will be spent.
- Prior tax returns. For an on-going business, provide past returns for a minimum of three years. Owners of start-ups may substitute individual returns.
- Financial status data. The lender will likely ask you to list your main personal assets (e.g., home and cars) and outstanding debts.
- Credit rating report. A good credit history enhances your viability as a borrower. Obtain a credit report from one of the three major reporting agencies – Equifax, Experian, or TransUnion.
The next step is to convince the lender that you deserve the loan. Be prepared to give answers to some basic questions, such as:
- How much money do you need?
- How much do you intend to finance personally?
- How will you spend the money?
- How do you intend to repay the loan?
- What type of collateral do you have to secure the loan?
- What type of expertise do you have in your business?
- How will you proceed if you don’t receive the loan?
Project an air of confidence. The lender will want you to show the leadership qualities that can sustain a business through both good times and bad. The interview is as much about you as it is about the business. For assistance in preparing your loan request, give us a call.