OBTAINING A BUSINESS LOAN
Okay, so your Business Plan has been edited, revised, perfected and now you’ve got your final packet ready to go. You’re ready to march into the world and present your business to lenders in hopes of obtaining funds to get your business moving.

But not so fast.

Before you walk through the doors of any bank, you need to know what else they will be looking for outside of your Business Plan in order to approve a loan.

Credit History
What potential lenders will look at most are credit records for both the individual owners of the business (the credit report associated with your social security number) and the business itself (the credit report associated with the business’ EIN or tax identification number). So, before you take your fund request to a bank, request a copy of your credit report from all three agencies: Equifax, Experian and TransUnion. Examine each report for errors and resolve all discrepancies before applying for a business loan.

Vested Interest
Lenders are looking to see that you, as the business owner, have a vested interest in the success of your company. In other words, the more personal funds you have invested in the company, the more they will expect you to work at it being successful, which means paying off your loans.

Ability to Repay
There are two sources of repayment that lenders look for, the working capital and collateral. Your working capital is the business’ assets (including income, equipment, etc.) less the business’ liabilities (monthly bills and expenses, debt, etc.). Basically, it’s the cash your business has available to keep the business running. Strong working capital means that your business is successful and less of a risk for lenders. To determine your working capital, lenders will want to see the following documents:anan

• assets and liabilities for the business and the owners individually
• tax returns for the past three years
• balance sheets for the past three years
• profits and losses statements for the last three years
• accounts receivable and payable aging

Your collateral – or assets available that you can sell in order to pay the loan, if necessary – can be through the business or the owners individually. Even equipment that you plan to purchase using the funds you receive through the loan can be used as collateral, because you can always sell them if necessary. Collateral is always a guarantee to the lender that you can repay the loan, and it is required for a SBA loan.

Experience
Lenders will likely deny your application for a loan if you do not have any experience in the industry that your business is in. They will consider your business a risk because you won’t be prepared for the competition and industry requirements for success. So you need to make sure that either you, other owners or partners, your staff or your board of directors has experience in that field.

While there is much more that goes into a business than developing your Business Plan and obtaining a loan, I hope that these last two weeks have provided valuable information and gotten you off to a good start. Good luck!

Business Plan - Part 1: Overview
Business Plan - Part 2: Market Analysis
Business Plan - Part 3: Define Organizational Structure & Management
Business Plan - Part 4: Define Strategies, Service & Product Line
Business Plan - Part 5: Funding Request & Financial Information
Business Plan - Part 6: Executive Summary, Table of Contents and Appendix
Business Plan - Part 7: Common Business Plan Mistakes
Business Plan - Part 8: Obtaining a Business Loan

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