|A great place to start is with a community bank. They can often put a face to the application process, and, since they operate in the same locality, there is a good chance that they will have prior knowledge of your business. Plus, decisions are often made on a case-by-case basis instead of using pre-determined formulas.
2. Plan on providing a plan -- A useful tool for convincing a lender that their dollars are safe with you is a no-nonsense business plan. After reading your business plan, your bank should have a strong understanding of what your business does, how it will make money and how revenue will be used to grow the business and repay the loan over time.
Be certain to include a detailed projection of how the loan funds will be used. The business plan should include a complete set of projected financial statements, including profit and loss, cash flow and balance sheet.
3. Be prepared – During your loan interview, you should be able to explain why customers should do business with you and how you’ll compete effectively. Be prepared to answer: How much money do you need? What are you going to do with it? When will you repay? What will you do if you don’t get the loan? Make sure you can back up all your loan application claims with facts. Remember, you are selling yourself, your confidence in your business plan, as well as your ability to make good on your loan.
4. Check your credit report -- Your personal credit history is one of the primary elements that lenders will review when considering you for loan approval. Prior to applying for a small business loan, obtain copies of your credit report from all three major consumer credit rating agencies and closely examine them. If you find any errors you should immediately report them and have your credit report adjusted before applying for the loan.
Even the smallest mistake on your credit report could be the difference between acceptance and denial of your loan.
5. Focus on repayment -- Lenders look for both a primary and secondary source of loan repayment. Primary sources of repayment relate to how much cash your business or investment is capable of generating. Secondary repayment sources could include pledging business or personal collateral, or a loan guarantee by the firm’s owners, suppliers or customers.
The more certainty that the lender has that the loan will be paid “as agreed,” the more likely that you will not only receive a favorable loan decision, but also the best interest rate.
JOHN DORNEMAN, is a vice president, business development officer at First National Community Bank. FNCB is a leader in providing small business banking solutions in Northeastern Pennsylvania. Visit their website at www.fncb.com or call 1-877-TRY-FNCB.