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In an economy where most bank doors remain closed to small business owners, it might be useful for a business owner to understand the qualities that a loan underwriter looks for in an applicant who is seeking a loan.
It goes without saying that every bank has their specific requirements. Generally, however, these are the factors considered.
• First of all, you should know that some banks will base their decision purely on numbers. They will just plug in the financial numbers of your business, your credit scores and other numerical information into a software program and wait for a reply. If your numbers are great, these banks are fine. If your situation is unique, you want to look for a funding source that factors in human evaluations.
• The next thing to do would be to communicate your needs very clearly to the banker. Tell them that you are looking for a certain principle at a certain rate. Many banks will often offer you a fraction of what you asked for after a long approval process. Communicating your requirements to the banker very early in the process will help you avoid wasting your time with banks that would never give you a loan.
• Avoid loan brokers or third parties who arrange loans as they can charge you exorbitant fees that will add to the cost of your business. Moreover, you have a much better chance of approval if you personally dealt with a bank yourself. If all fails, then you can consider these funding sources.
• When approaching a bank for a business loan, make it very clear to them that you want to keep your personal and business credit separate. Some banks will approve your business loan but peg it to your personal credit history which will make it very difficult for you to make a large personal purchase such as a house or real estate. Some banks will not want to work with you if you request that the two credit scores be kept separate. You should not mind this and only work with banks that are willing to treat your personal credit and business credit separately.
• You must understand that a bank will take all your expenses into account when they consider your business loan. This will mean that they will look at your rent, mortgage, car payments, credit card payments, utility bills and so on. Thus, you will have to match all these expenses by reporting all your income, apart from the business income. If you have a spouse, report her income and also report income that you receive from financial investments such as stocks and bonds if you have any.
Assuming you have a writeable loan request, the primary battle in getting funding is to find the right source and then position your application correctly. Get these two right and funding should be just around the corner.
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