BANKING: SMALL BUSINESS LENDING
We sometimes hear business owners say that approaching a bank for a loan is intimidating, time-consuming or that they don’t understand why their banker requests so much information. There are steps that make the process faster, more streamlined and less stressful. Outlined below are three to consider.
Have a Good Understanding Of Your Borrowing Need:
Is it triggered by a short-term issue that is causing the business to need cash for just a few weeks or months, or has sustained growth in the business caused higher levels of inventory or accounts receivable? Are you in need of additional equipment, vehicles or modifications or additions to your office? These loan purposes are uniquely different, will be structured differently and the amount of equity or down-payment expected from the borrower will vary as well.
Ask Your Banker for an Appointment:
Seeking a business loan is important to you, and it’s valuable to have your banker’s undivided attention when discussing your needs. Make sure he or she has set aside an hour to spend with you, and even consider asking the banker to come to your business. It gives a much clearer picture of your business’ story and can provide a valuable visual of your borrowing need.
Be Prepared for the Meeting:
This is important. We need a number of information items to arrive at a loan decision, and the loan process is smoother and faster if the banker has everything necessary to approve your loan. Your banker will need three years of financial statements or tax returns on the business, personal tax returns, a personal financial statement, a description of the proposed collateral, a listing of existing business debts and your organizational documents. A brief narrative of your business is helpful. It should describe its background, ownership structure, primary customer relationships, etc. Finally, if the loan need relates to expansion of your business, then a business plan with a financial projection for the next year will help tell your story as well. Try to have these things available at the meeting.
Banks are eager to make loans as they represent the primary source of our income. Loan requests that are approved by banks have common characteristics: identified cash flow that is ample to repay the loan; good credit history of the owner(s); a business that is healthy and appropriately capitalized; and col-lateral that is suitable for the loan. The more readily we can identify these traits, the more likely we can quickly say yes to your request.
Meet the Expert:
Gene Crane, Executive Vice President River Bank and Trust
Gene Crane has worked as a banker in Montgomery for 31 years. In 2011, he joined River Bank and Trust, a local community bank, where he is an Executive Vice President and a member of the bank’s management team.