When applying for a small business loan, have you often wondered what bank managers look for when deciding whether or not to support your application?
One of the key aspects is you. If you have a small business, chances are the business is just you and probably not many other people. You may operate under an impressive name or from flashy offices, but if it’s all up to you, from the bank’s perspective, “you” are the key to a secure loan.
These are just a few aspects of a person’s character that banks consider important.
How old are you?
Like it or not, age has to be a factor in credit evaluation. If a businessman, particularly a one man gang operation, takes out a loan that is repayable in 25 years and is already 70 years old, the chances that he will be around to see payment are pretty slim! If he is also the key person within the business that makes everything work, then the loss of him can have an impact on the performance of the business.
On the other hand, a pimple-faced 18-year-old guy who just got out of school asking for $100,000 can’t be considered a fortress either. Age is not a major issue, but it is something that is taken into account.
What is your level of commitment?
A manager can usually get a sense of a person’s commitment to the project or business in a number of ways. For example, it can be reflected in their language and the passion with which they talk about the business. The bank wants to see someone passionate and enthusiastic about the project, so now you can see why it’s important to look and sound confident.
A business owner’s commitment can also be measured in more tangible terms, such as how much of their money they are investing in the business, or alternatively, how much they have taken out of the business over the years. If the owner has regularly injected cash into the business to help with working capital or to buy new machinery, then this is an encouraging sign. However, if cash is withdrawn on a regular basis for no apparent reason, then the Manager will need to ask why, as he or she may not be fully committed to the business.
But what happens if only a small amount of cash or no cash is invested in a new project? Well, if you don’t have it, then you don’t have it! However, commitment can be evidenced by the fact that you are willing to pledge your home.
In the meantime, one question to ask yourself is what your commitment to the business looks like to an outsider.
Seeing what the business owner has put up and what he is willing to lose will help the Manager arrive at a fair assessment of the person’s commitment. Let’s hope it’s evaluated more as a strength than a weakness!
Can you be considered an upright and honest person?
This is a difficult question to gauge, but we all get vibes about people within minutes of meeting them. Things ring true to you or they don’t.
To support his intuition, the manager can often get information about someone from other people. Bank staff are sometimes a good source of information for Managers. Every office has someone who seems to know everything about the local people! These people are a fountain of knowledge!
If you have skeletons in your closet, don’t assume they won’t come out! If they’re bad enough, they’re bound to surface, and that can affect your chances of success.
What was the source of the introduction?
When preparing your Business Plan, or building your new business, you may decide that you do not want to submit it to your own Bank for a variety of reasons.
Having made the decision to refer your Plan elsewhere, you have 2 options: you can either show up at the Bank of your choice or you can ask a business colleague to introduce you to your Bank (assuming you are happy with the service they provided). it is receiving).
If he knows you and the skills you possess, he may be prepared to do more than point you in the right direction; he may be happy to “answer” for you. By doing this, he is telling his manager that, in his opinion, he has a good chance of success and that he is worthy of support.
If your presenter is a respected businessman and has a good bank account, then this type of presentation could be considered a strength, a positive point in your favor.
You can see that by running a small business you are a very important asset to the Bank. Be sure to capitalize on that when you approach the bank for a loan.
Robert Warlow
small business success
