When Decidingto Give a Business Loan

Things Banks Look for Whether or Not

Lenders have stringent guidelines that they follow when assessing small business loan applications.

Many bankers are forced to turn down applications that do not meet the standards

set by the bank.The following outlines the key aspects that

are examined in the financing process.

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Banks will analyze the business owner’s current

financial situation including net worth,

details on assets, and past credit history.

Personal Financial Information

Your business must pledge certain assets to back up the

loan to minimize the risk to the bank. If you fail to make proper

payments on the loan, the lender may seize these assets.

Collateral

Bankers will assess the past financial

performance of the business. In order to do so, they require

past audited financial statements.

Financial Performance of the Business

Financial ProjectionsYour team must compile financial

projections for the business. Lenders will evaluate future cash flows and your ability

to pay back the loan over the term.

If your business has substantial accounts

receivable or accounts payable with third-party vendors, the lender will

often need those agreements to assess the stability of these vendors.

Vendor Agreements

Business PlanCompiling a concise business plan will

allow the bank to see key accomplishments

of the business to date and a roadmap

for where the business plans to go in the

future.

Management TeamLenders like to see

owners and management team members that have

experience in running their own business and

have a past track record of paying back business

loans.

Market ConditionsLoan officers will analyze a

company’s industry and market. If the business is entering into a high-risk

industry, the bank will take that into account.

Personal Investment in the Business

Most lenders require business owners to

invest a certain amount of capital into the

company to make sure they have ‘skin in the

game.’

Allocation of FundsLenders will require the owner to disclose where the funds from the loan

will be allocated towards. The use of

funds should be allotted towards certain assets

and working capital allowing for growth.

• Personal financial information• Collateral• Financial performance records• Financial projections• Vendor agreements• Business Plan• Management Team• Market Conditions• Personal Investment• Allocation of Funds

In summary, these are the key things you will need in order to secure a

bank loan:

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