Which Bank? - Business Loans

You may already have a relationship with a bank, and this is generally the logical first choice for borrowing money. But whether this is your first loan, or you are borrowing additional money, you should consider several points before selecting the bank.

Be positive. Although it is you that needs the money, you should take command when it comes to choosing the bankers or partners you want to deal with.

Go to a bank that is sincerely interested in your business and will provide you with the services you need. Also you should look for a banker that you are familiar with or one that has experience with similar businesses. Let the bank know the value of your business to the community and what its future deposits could mean for the bank.

Key questions to ask bankers include the following:

• Do they have an industry specialty related to yours?
• What are their professional backgrounds, especially in terms of whether they are commercial or consumer lenders?
• What is the average size of their borrowers?
• How long have they been in these positions?
• Do they have the level of lending authority you need?

Presenting your loan proposal

Okay, now your loan package is prepared and its time to get ready to present your proposal. Before you go to the bank it is a good idea to role play with someone you trust. This is not the sort of presentation that you make every day, and this can help ensure that you are comfortable discussing all the material in your loan package, and have considered all the questions your banker might ask in the initial interview.

Before you approach a bank you should:

• Have comprehensive written documentation ready.
• Know your numbers inside and out.
• Know what collateral you can offer.
• Be prepared to sell yourself.
• Handle the meeting professionally – The worse thing you can do is come late. Also this is usually a formal meeting, you should have a business demeanor throughout the meeting. Let the prospective banker the benefits your business brings to the bank in terms of average balances in checking accounts, savings accounts, and present and future financial needs. You should also ask them questions to see if you think they are the right people to handle your account.

After you present your loan proposal, ask the banker what can be expected in terms of a response time, or when they will request additional information. Obviously, the request won't be approved in the initial meeting. But if you've done your homework, you will already have a good idea of whether or not your loan is likely to be approved.

If your loan is approved:
(besides celebrate) make sure that you:

• Thoroughly review all loan documents and understand before signing. Consult with your lawyer or accountant if you have any questions.
• Get documents in on time -- frequently there are a number of documents that cannot be finalized until after the loan is approved and closed. Keep up that good impression the bank has of you by promptly responding to requests for additional information, documents, signatures, etc.
• Maintain close contact with your loan officer. It is a good idea to give her progress reports -- the bank now has a vested interest in your success and will want to be kept current.
• Communicate problems. Bankers, don't like surprises, particularly if the news is bad. So, make sure they are one of the first contacted if you encounter any problems.
• Once your banker makes a loan to you, he or she has a vested interest in your business success. If you prosper, the bank prospers. If you fail, the loan they approved is not going to be paid.

If your loan is not approved:

• Don't despair.
• A “no” today doesn’t necessary mean a “no” next time round.
• Don't take it personally.
• Be gracious.
• Ask the banker to explain "why" your loan was not approved.
• Don't get defensive, seek information so that your next proposal addresses and corrects any deficiencies in the current application.

What to do when no one will lend you money:

There may be times when knowing the money markets, as well as preparation, presentation, pluck and persistence just don't seem to work. The key to overcoming this financial obstacle is not to get bitter: get resourceful. Remember there is more than one way to skin a cat.

If you have a viable business idea you should be able to find funding... as long as you have done your homework and developed a written business plan.

Other owners have raised money from friends by making attractive interest rate offers to friends and acquaintances for loans.

What ever you do you must prepare yourself, before you implement that growth strategy. Your business plan will provide you with a way to look, before you leap.