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Business Loans: What a Lender Is Looking For

If you’re starting up a business, you’ll need some capital to begin with.  Perhaps you already have a going concern but now you need money for expansion.  In both cases, you may have to visit the bank or other lending institutions to borrow the necessary funds.

You have to maximise the chance that the lender will be persuaded to lend you money.  Just as lenders pitch themselves as good places to get money from, now you have to convince them that you’re a good lending risk for them.  What can you do?

1)  Dress the Part

Let’s say you’re a bank officer and you’ve been assigned to review two applicants filing for business loans.  In ambles the first one, dressed in torn jeans and none-too-clean uppers, with a discernable lack of personal hygiene detectable from twenty feet away.  The second one walks in briskly, neatly dressed in a three-piece suit, and favours you with a friendly, if somewhat nervous, smile.  Stop.  Off the bat, which person would you be inclined to lend money to?

There’s no doubt that there’s more to first impressions and appearances.  Miscommunication, subterfuge and fraud do exist, so it’s impossible to be dogmatic about appearances.  Why give the lender a bad impression, though, when you can so easily make a good one?

2)  Make a Plan, Know the Details

A lender is more likely to be impressed by a prospective borrower who has done his/her homework.  So if during the course of the interview a borrower brings out a couple of spreadsheets and presents a well-thought-out business plan which satisfactorily answers the lender’s questions of “Who are you, why do you want to borrow money, why should we lend you money, how are you going to spend the money we’ll lend you, and how can we be sure you’re not going to throw it away on some hare-brained scheme?”, he might stand a chance of getting his loan.  If, in contrast, another borrower who’s asked the same questions can’t come up with definite answers, then his chances of getting a loan will get significantly lowered.

3)  Anticipate the questions you’ll be asked and have your answers ready.

Lenders also want to look at financial statements.  They want to know what they’re getting into, so they will likely ask for information such as personal financial statements and tax returns as well.  A borrower who is ready to provide that quickly is bound to impress a lender favourably.

4)  Know the Lender

Before you borrow, find the answer to questions like the following:

-What sort of businesses does the lender usually deal with?
- How long has the lender been in business?
- Have the lender’s clients been more consumer or commercial in nature?
- Is the lender affiliated in any way with businesses related to your own?

By so doing, you may find information that will help you choose the right lending firm for your business.

5)  Have Long Relationship, Win Leverage

A good standing with your bank could be a factor in helping you obtain a business loan, as you would then represent more of a known quantity.  A lender will want a client whom they can work with on a long-term basis, and you should as well.

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