As a small business owner, it is often difficult to obtain the loans you need. Here are 5 ways to increase your chances of securing business loans to run your company successfully.
- Create Contacts
Build relationships with individuals who work for local banks. Keeping them up-to-date on the status of your business will facilitate trust and communication over time. Creating a good reputation will make it easier down the road when you apply for a loan.
- Be Financially Informed
Be able to present financial information such as profit and loss, balance sheets and cash flow statements for your company from the past three years. Being knowledgeable about your business’s financial status will show control over your company. In addition, the bank will be able to assess the risk involved and predict how your company will move forward. Present the information with confidence to prove that you deserve the loan.
- Explain Your Reasoning
Do your homework. Know the components of your business and use them to build your forecast from the bottom up. Assess areas such as company achievements, time and cost of driving customer purchases, gross profit of sales, etc. Be confident, yet realistic when predicting the future progress of your business. Make sure you are conservative in the numbers you present for revenues and expenses. Do not make false promises or set yourself up for failure.
Banks want to provide loans to business with the lowest risk. Be able to show plans of how you will repay them in various scenarios, especially if things do not go as planned.
- Eliminate Doubt
Take initiative. Be the first to personally guarantee the loan to the bank. Although this may already be a requirement to take out the loan, bringing it up yourself shows confidence in your company and proves that you are willing to mutually take on the risk. If applicable, provide information on the history of past repayments to reduce worry even further.
Utilize these tips when discussing potential loans with several different banks. Various institutions will have different standards for the same process. Shop around to find a bank that works best for you and your company. If a bank does not agree to give you a loan, ask what changes need to be made to receive a loan in the future.
Lodestar Advisors is a firm focused on tax saving strategies and accounting automation techniques to facilitate business growth for their clients. They are well versed in cash flow projections and business planning. Call for a free consultation.