Understand what your banker is looking for when you approach him/her with your business plan/budget requesting a business loan.
- Experience – specific business/industry (as manager/owner)
- Resume – classes, training, previous skill usage
- Skill of your team – staff & advisors
- Action plan to get needed skills that are lacking
- Show that the business can repay the loan
- Cash flow & income statements
- Where did you get those numbers in the budget?
- Schedule loan repayment period to life of the asset
- Run financials also with worst case interest rate tests
- Show willingness to pay
- Credit history (check into you current credit report)
- Get any bad news on the table up-front – no surprises later
- Bankruptcy & bad credit
- Problems with the law – criminal history may delay processing of the loan.
- If married or separated, spouse must sign financials. (Community property state)
Debt / Worth
- You MUST use some of your own money
- How much? Average 20-30% depending on risk & amount
- Borrow against your personal assets
- Borrow from friends or family
- Seller financing
Collateral – Security for the loan
- Assets you may lose if business fails
Contingency – Be prepared to discuss how you will repay this loan in the event the business can not.