Tips From a Banking Executive to Help Secure a Business Loan
You have an idea for a startup, but you’ll need more than ambition to make it a reality. You’ll need cash. You might seek investors or borrow money, but getting a loan from a local bank is still a popular option.
But before dressing up and meeting with a banker, get a few things in order to improve your chances of approval.
John Marrocco, the head of business banking for Fifth Third Bank in Cincinnati, says many business owners walk into the bank unprepared. Making matters worse, many are unrealistic about the amount they should borrow. To avoid this, Marrocco offers these tips to secure a business loan.
Have a good business plan
A business plan serves as a road map. It defines your business, sets goals, and explains how you plan to meet them. On a personal level, it offers a cohesive vision and helps you oversee your business. Financially, it gives bankers a sense of your business and its profit potential.
“Presenting your strategic business plan to your banker will help them understand your business’s future stability,” Marrocco says.
Not sure where to start? Check out this free business plan template. For additional guidance, try LivePlan, a cloud-based software that integrates with QuickBooks and helps create a top-notch plan.
Once your plan is ready, double-check it to ensure it answers these three questions:
– Does my plan have clear, measurable goals?
– What are my strategies to meet these goals?
– What is the competitive landscape?
Identify your long-term business goals
A long-term goal of “making money” won’t cut it—you need a vision.
Your banker needs to understand your growth plans. For example, do you want to double the size of your company in ten years? Expand your product line?
Presenting your long-term business goals will help your banker assess your ability to achieve them and recommend suitable products and services.
Bring the right documents
In addition to your business plan, bring tax returns, bank statements, proof of insurance, letters of incorporation, trademarks, and any applicable licenses.
Be prepared to talk numbers
Know your current cash flow and expected revenue. Your banker will want to know if you have a revenue stream and how you track it. Discuss ongoing costs, such as rent, utilities, payroll, equipment, and supplies. If your business is seasonal, talk about how you navigate slow months.
You’ll also be asked about your financial contributions. Banks want to know how much money you’ve invested in your business and how much more you’re willing to contribute.
This helps the banker assess your ability to repay the loan. Be honest and show them you’re a good investment.
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