Business Loan Basics: Do You Know How to Prepare?
Before applying for a loan, be prepared. Answer these questions in advance to get a step-up in the process.
When your business needs financial assistance, these tips prepared by the
Business Financing Symposium should help you know what to expect from a lender and how best to prepare.
ASK YOURSELF THESE QUESTIONS
- How much money do I need?
- What type of lender do I need? (bank, state or federal agency, venture capitalist or other investor, or nonprofit lender such as REAP)
- What is the lender’s minimum and maximum loan size?
- Can the lender meet my present and future needs?
- What types of businesses will the lender finance?
- What collateral does the lender accept?
LENDERS USE THE EIGHT “C’S” RULE
- Credit (must be good)
- Capacity (ability to repay)
- Capital (money going into the business)
- Collateral (your assets that secure the loan)
- Character (you)
- Conditions (economy, finances, anything that will affect your business)
- Commitment (your ability and willingness to succeed)
- Cash Flow (prove the business can support its debt and expenses)
QUESTIONS A LENDER WILL ASK YOU
- How much do you want?
- How will the loan be used?
- How long will it take to repay the loan?
- How will the loan be repaid?
- What collateral do you have to offer?
- How much are you investing in the business?
BEFORE MEETING WITH A LENDER
- Call to find out the rules for business loans.
- Is the lender looking for loans of your size and type?
- Ask for a loan application to be sent to you.
- Make an appointment.
- Rehearse your presentation.
- Remember – your first customer is the lender. Before you sell anything, you have to first convince the lender that your business concept has merit.