Travis Andry, First Vice President—Commercial Lending
Applying for a loan shouldn’t be intimidating. After all, banks are in the business of making loans. Finding a way to say “yes” is as high a priority for us as being approved is for you.
To help you focus your energy on what matters most in a loan request, here are five things to have in mind before applying.
- Your bottom line is more important than your top line.
Many small business owners focus their time and energy—and base their request—on top-line growth. While revenue growth is important, the financial strength of your business is measured based on your net profit. During a review, we spend much of our analysis understanding how revenue flows through your company. The reason is simple: we need to determine if there will be sufficient net income to repay any loan we might approve. But, we also look to see if another solution or a different type of financing is needed to address any cash flow issues.
- Don’t just say it; prove it.
While poor financial reporting isn’t a sign of a bad company, it can diminish your ability to document and support a loan request. Bankers need good information in order to understand how the business is really doing and how a loan may help. Before applying, it’s a good idea to make sure your inputs are correct and you can verify the numbers you’re submitting to us.
- “Why” is usually more important than “what.”
Often, clients will come in and say, “I need $50,000 for working capital.” But in the absence of additional information, what we hear is, “I have a funding shortfall.” Shortfalls occur, for example when a manufacturer has to pay for inventory and labor before ever shipping the finished goods or being paid. Often buyers take 90 days to pay. Covering shortfalls implies a different type of credit risk for us than a request for financing to replace a piece of equipment—or to add one—in order to improve efficiency.
If that is the purpose of the request, say so up front. In this instance especially, the gain in efficiencies is likely to create a savings that could help offset the increase in your financing expense. This would make it much easier to approve your request, which is why knowing the “why” is so important for us.
- Having a business plan is good, but it needn’t be a work of art.
Much is made of having a formal business plan before asking for a loan. It is a good idea, but bankers don’t need anything elaborate. It can be a bullet-pointed summary since a plan consists of projections, not facts. Although, plans do help us understand how you see your business growing.
- Bankers are more useful as advisors than adversaries.
While there are many online financing options that eliminate the need to make a face-to-face request, it’s ultimately more beneficial for a borrower to know—and be known—by a banker. Today’s loan request isn’t likely to be the only one you ever make on behalf of your company. It means you have a point of contact throughout the borrowing and repayment process and an advocate when you need to borrow again.
To learn more about how we work with you to build a sustainable relationship that can contribute to the growth of your business, contact me at 630-264-3004. You can also visit us here. We can’t wait to talk to you about what we can do for you today.