5 Tips to Prepare for Your Small Business Loan Meeting
5 Tips to Prepare for Your Small Business Loan Meeting
Applying for a small business loan or line of credit can be a key step in starting a new enterprise or moving it forward.
When you meet with your lender, they’ll request documents and ask questions to get to know you, your business, and your goals. Being well-prepared for this meeting can help you demonstrate that you’re a creditworthy client.
Here are five ways to get ready:
1. Create a Business Plan
Commercial lenders like careful planners. Be sure to have a clear, detailed explanation of your business, its place in the market, and your vision for growth. Be ready to discuss your products or services, your industry and competitors, and the steps you are taking to build long-term success.
Be prepared to outline the purpose of the loan, whether it’s to start a new company, finance an expansion, build your team, secure equipment, or roll out a new product line. Your lender will want to see that you will use these funds strategically and have a solid plan for covering your operational expenses and repaying the loan.
You’ll also need to explain your ownership structure, whether your business is a sole proprietorship, a partnership, an LLC, or something else.
2. Prepare Your Financial Statements
Your lender will want to review your financial documents, too. You’ll need to show your enterprise’s revenue, expenses, debts, assets, and cash flow.
You should also be ready to furnish your business’s bank account balances and recent tax returns, as well as personal financial statements, tax documents, and contact information for you and anyone else who owns a substantial portion of the business.
It may also be helpful to use a forecasting template – many of which can be found for free online – to project your business’s future revenue and expenses. Lenders understand that no one has a crystal ball, but demonstrating that you’re thinking ahead and setting realistic objectives can go a long way to establishing a trusted financial relationship.
3. List Your Collateral
If you’re applying for a secured loan, you’ll need to prove that you have assets that can serve as collateral. Putting up collateral is a calculated risk, since it can be seized if you fail to repay the loan, but it can increase the amount of money that you can borrow and get you a lower interest rate.
In other cases, commercial lenders won’t ask for collateral, but they may require a personal guarantee on the loan.
Depending on your business and personal circumstances, collateral might include:
- Cash in your bank account plus cash equivalents - Investments like stocks, bonds, and mutual funds - Real estate including buildings and undeveloped land - Business equipment including tools, technology, and fixtures - Vehicles like company cars or agricultural machinery - Accounts receivable including any unpaid invoices - Inventory including raw materials and work in progress - Intellectual property you hold, like patents and licenses
4. Understand Your Options
It’s important to know the different loan types available and how they can support your business. The amount of funds you need, your creditworthiness, and timing will all play a factor in determining what your best option is.
Here are a few loan types to consider:
- Business term loans to meet one-time financing needs, such as renovating your facility or purchasing equipment - Business lines of credit to provide flexibility for short-term cash flow and access to more capital as you repay - Commercial mortgages to give your business room to grow and entry to real estate as a long-term investment - Business credit cards to expand your available capital for day-to-day expenses and build your credit history - Merchant cash advances to get quick cash upfront in exchange for a percentage of your daily or weekly sales
5. Know the Six C’s
The factors that most influence your creditworthiness and ultimately your ability to secure a business loan are sometimes known as the six C’s.
Understanding and optimizing each of these items can help you get where you want to go:
1. Capacity – your earnings, debt service ability, and preparation for ups and downs 2. Capital – how your assets stack up compared to your liabilities, and how liquid they are 3. Collateral – the assets you have that can be borrowed against, and any debts attached to them 4. Conditions – your business’s position in the marketplace and the overall economy 5. Character – your personal integrity, industry experience, and borrowing history 6. Communication – your willingness to engage in open and honest dialogue with your lender
Making the Right Choice
As you assess the borrowing options available to you, consider Nu Direction. We’re a small business lender owned by federally insured, not-for-profit credit unions, which means that we can bring you the speed of fintech lending with the spirit of community lending. Your business can receive instant preliminary offers and loans up to $500,000 with funding in as little as one week.
The information contained herein is for general informational purposes only and does not constitute tax, legal, or business advice.
Brought to you by Nu Direction Lending, a digital-first business lender that was formed and is funded by credit unions. To learn more about term loans for your business, visit nudirectionlending.com or contact us by email at firstname.lastname@example.org or by phone at 866-354-7151.
Nu Direction Lending is a digital-first business lender that was formed and is funded by credit unions. We combine the speed and convenience of online lenders with the personalized touch of the local credit unions who help fuel our local economies.