There are a couple
of old sayings that relate to getting a loan. One is that
bankers only want to lend money when you don't need it.
However, you can change the odds of getting cash when you
need it by gaining a clearer
understanding of the
Be honest regardless of whether the information is positive
Make promises that you're unable to keep.
Present a clear, concise and comprehensive plan. Know the
amount you need. Provide written documentation.
Ask the loan officer how much money you can borrow.
Set an appointment to discuss your request with a loan
officer. Allow enough time. Negotiate loan terms and rates
after presenting a complete request.
Be demanding and over-anxious. Insist on term and rate
information over the phone without presenting the necessary
Ask questions about anything you don't
Spend the money before your loan request is
Loan officers will look for at least two sources of
repayment and possibly a third:
operations for short-term loans and continued positive
earnings for long-term loans;
such as a
mortgage on fixed assets, accounts receivable, or inventory as a
backup to the first source, and
A personal guarantee if
the lender wants a third source that demonstrates
your commitment to the operation and its
There's another aspect of the loan
application process from the lender's viewpoint. The loan officer is
going to want answers to questions on the Five C's of
Capacity. What is your ability to meet the financial obligations
of the debt, and what are the track records of both you and the
Collateral. What assets can you pledge to support the primary
source of repayment?
How much equity is there in the business and how much of your own
money have you devoted to the project?
Character. How trustworthy are you and your partners? Regardless of the
financial forecast presented, the loan officer must evaluate the
Conditions. What is the outlook of the economy and the industry?
The other old saying: Forewarned is
forearmed. Understand the process, have your answers ready and
convincing and you boost your chances of borrowing the money you
Infusion - Most small businesses require a cash infusion
at some point, for needs like expansion, working capital or
investments. Getting a large loan involves more than pouring
your heart out to a bank officer and hoping the lender will take a
risk on you. You need to be prepared to tell the whole story,
present a business plan and make the lender believe in the
future of your company.