Bankers want to make successful business loans. They look for companies that own assets such as machinery or buildings that can be pledged as collateral. Bankers like to see a healthy flow of revenues and, for a start-up, at least one year of successful operations. When applying for a business loan, come prepared with paperwork and information that will show the banker that the money you borrow will be used to strengthen your company's financial health and make it likely that the loan will be repaid on time.
Update your business plan to include the project you are seeking to finance. Show the research that supports the likelihood of project success. Describe in detail the uses of the loan money and how the money will contribute to the creation of revenues. A business plan will allow the banker to quickly understand your business model and revenue model. The more the banker knows about your business, the easier it is for him to suggest ways to improve your chances for a loan.
Copies of your complete financial reports and tax returns should be ready for your first meeting. Cash flow statements are particularly important. If you have undertaken cost reduction procedures, bring a report that shows the results of your efforts. If there are areas where you could reduce costs, present a plan for achieving those cost reductions. The more you demonstrate your skill as a manager of a successful business the better your chances of getting a loan. If your banker has to repeatedly ask for more information, he will have less time to spend on finding solutions to your funding needs.
Contracts with large customers, marketing plans, invoices, sales reports, papers evidencing ownership of assets that can be used as collateral, patent and trademark information and anything else that supports value in your company should be shown to the banker.
Consider different ways you can phrase your loan application. Don't be afraid to ask your banker for help in doing this. For example, you have spent your marketing money taking advantage of an opportunity to purchase extra raw materials or inventory at an extremely good price, and now you must find money to spend on your marketing campaign. It is unlikely the bank will make a loan for marketing, but you may be able to phrase your application as inventory financing. Your banker will advise you on the best way to do this if you present this as a possibility.
Victoria Duff specializes in entrepreneurial subjects, drawing on her experience as an acclaimed start-up facilitator, venture catalyst and investor relations manager. Since 1995 she has written many articles for e-zines and was a regular columnist for "Digital Coast Reporter" and "Developments Magazine." She holds a Bachelor of Arts in public administration from the University of California at Berkeley.