By Ritu Sharma on Feb 14, 2019
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Leverage your assets
You should be able to show that you have assets to back your loan and that you have a career that can support payment of the business loan. Basically, the bank should feel that you are a safe bet for the bank.
Summarize your business plan
All that the lender cares about is getting its money back. It is a good idea to prepare an “Information Memorandum” – a summary of a business plan outlining the investment highlights for the lender. They will look at the following things- management team (experience), market opportunity, core business, growth strategy and exit strategy.
Know how and when you will repay
Be prepared with a repayment time frame and your cash flow projections. Your business plan should be presented, stating your ability to achieve long term profitability where you will repay the loan at the prevailing business lending rates. It is always advisable, to be honest, and upfront in this regard as a weak business plan is easily perceptible.
Put your personal finances in order first
Before meeting with a loan officer, you will need to prepare a case for your loan request. Make sure you put your personal finances in order. Be well-equipped to communicate clearly with the bank regarding the kind of collateral you can offer and to decide whether you are willing to sign a personal guarantee.
Have the right paperwork
This process is quite standard. The bank will need you to produce your previous 2 years’ financials with profits in both years. Having a good credit score and showing personal financials also makes a significant difference when you apply for a business loan.
Bring your contracts with you
All your projected financials should be in clear and accepted forms. Also, bring any revenue generating contracts you may have. It will be quite helpful in fact, to have in place anything and everything that shows your company has a future (and some history).
Spend the time preparing
You should have a resume, a business plan, legal documents, bank statements and good credit. Make sure you are ready with answers for- why are you applying for a loan? Who will be managing the business? What will you use the funds for? What credentials do you and your team possess?
Be prepared for hoops
With the banking environment no longer as relaxed as before, entrepreneurs often find themselves frustrated. If there are no other options, be ready to produce solid financial data. If possible, secure financials before you need it, because, in all likelihood, it will be difficult to obtain when you really need it.
Work on your pitch and demonstration
Your pitch should ideally be between 1 to 2 minutes and you should express your idea clearly through 3-4 steps- what the product/service is, what problem it solves, who would buy and why. As additional support to your pitch, have a demonstration or a prototype of your product/service ready. Last but not least, give them a hard copy of your pitch and the main details.
Reveal your customer
Many business loan pitches are bogged down by numbers, projections, and lofty ideals. After all, customers are of prime importance in any business. It is imperative to know your customer inside and out. Establish why your customers will buy your product/service and how you intend to build a lasting relationship with them.
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