Securing loans from commercial banks is quite hectic.
In particular, small business startups are often seen as the riskiest loans that any bank may provide.
Understandably, they’re nervous about new businesses because most of them don’t have what it takes to meet the loan requirements.
However, it’s easier for small businesses to get banks to say yes to their loan application.
And in the article below, we shall look at the tips that will just help you do that.
But before then, you will need to determine whether you qualify for a loan in the first place. You can use the checklist from Finimpact about how to get a loan and see whether you’re eligible.
Now, let’s see the “Yes” Checklist for small businesses.
Have Detailed Projections
The first step to getting a bank say yes to your loan application is having detailed projections.
Having detailed projections assures the lenders that your business is going to accrue enough profits and maintain a steady cash flow to service the debt.
The projection should precisely flesh out how your small business will attain its revenue goals.
Here, you’re also required to show the expense estimates and how you’re planning on breaking even and green over the long term.
Bankers will expect you to provide a detailed analysis of the anticipated costs or running your business and how you plan to achieve your revenue.
Another tip to get a yes from a bank is outlining your marketing strategy.
See, marketing forms the lifeblood of your business and having a robust marketing strategy will guarantee a healthy business.
Lenders will want to see how effectively you connect your small business with the right customer base.
Though this seems like a pretty simple concept, it can take on a variety of shades.
The lender would want to know how you promote your products, and your marketing plan should answer why clients need your products.
Other crucial aspects that any business owner should be prepared to highlight:
- Demographics of their client base
- Where they live
- Where they look for products
- Are they online
The above list is by no means conclusive, but it should provide you with a rough idea of what to expect.
Many business owners think because they have an impressive credit score that they automatically qualify for a loan.
In reality, banks often look more than the financial aspect of the business but look at it holistically.
In any case, the financial aspect is just part of your business.
The lender might be interested in how the business is run.
According to Forbes, many investors might explore the entrepreneurial culture in your enterprise, and look at the alignment as well as the coordination of the different activities in your business.
For new startups, the owner might have an incredible resume at managing big corporate firms but might be a suitable option to start and run a restaurant.
If you’re acquiring a small business, the bank might also want to see the detailed plan of the acquisition as well as the plans for management transition.
Few business owners usually consider their location as a prime aspect of getting financing.
See, location not only offers your business a shot at surviving but thriving as well.
Depending on the type of business, physical location can be a determining factor to whether you’ll be granted a loan or not.
Ideally, when setting up a business, you should look in the most popular places. Besides popularity, you would want to set your business in a convenient place that will align with the users in the location.
For instance, if you’re opening a coffee shop, you would want to set it up in a busy street, where people often take their daily commutes to works, such as along a train or bus station.
There are many things that you could do wrong or right when applying for a small business loan from a bank.
However, following out above guidelines will ensure that banks will most of the time say a yes to your application.