- Report this article
Garrett Sutton
Garrett Sutton
Owner/ Founder at Corporate Direct, Inc.
Published Jan 22, 2016
+ Follow
A lot of borrowers are unaware of what it takes to get a business loan. They think that if they have been a regular customer of that bank, the bank should give them a loan; or if they show up with a passion about their business, the bankers will share that enthusiasm.
You will make a great impression if you know what the lender wants. Commonly, a lender is looking for the following:
- Cash Flow and Profits: Business tax returns that show two years of profitable operating history, or enough historical profits to cover your personal expenses and make a loan payment.
- Bank Accounts: Bank statements that show well-managed personal and business checking accounts—that is, no overdraft, transfers between accounts that follow sound business practices and healthy balances for business operations and household expenses.
- Credit History: Good credit history with no defaults or bankruptcies.
- Collateral: Equity in real estate, large equipment or vehicles.
- Equity: Business owner has 25% of total project costs in cash or direct investment to contribute to the project.
- Uses of funds: Funds needed to expand or evolve an already successful business.
- Industry Experience, Planning and Research: A solid business plan based on industry standards.
- Supporting Documentation: Location, job creation potential, type of business and any information that enhances the business’s chances for success.
If a borrower has all of the above, they will be considered low risk and have more loan options. When one or more of the above is shaky, such as a history of overdrafts, unexplained deposits and transfers in the bank accounts, the funds are needed for business start-up or refinancing, or the business owner has little or no industry experience, then the loan application is considered to have more risk. For more information please see my book Finance Your Own Business: Get on the Financial Fast Track.
Like
Celebrate
Support
Love
Insightful
Funny
6
To view or add a comment, sign in
More articles by this author
No more previous content
- Garrett Sutton Recognized For Lifetime Achievement Mar 26, 2018
- Is Your Website Ready For ADA Compliance? Aug 16, 2017
- The 7 Most Common Legal Mistakes Startups Make Aug 16, 2017
- 8 Ways to Know If Clients Value Your Services Jul 25, 2016
- Learn 6 Indicators of a Toxic Client Jul 14, 2016
- The 7 Most Common Legal Mistakes Startups Make May 8, 2016
- Courts Strike Down Another IRA Investment Scheme May 6, 2016
- Infographic: 7 Steps to Build Credit Quickly Apr 12, 2016
- 11 Tips for Establishing Credit for Your Company Apr 12, 2016
No more next content
Sign in
Stay updated on your professional world
Sign in
By clicking Continue to join or sign in, you agree to LinkedIn’s User Agreement, Privacy Policy, and Cookie Policy.
New to LinkedIn? Join now
Insights from the community
- Banking Relationships How can you demonstrate your ability to repay a loan when negotiating with a commercial bank?
- Negotiation Here's how you can secure loans for your businesses by negotiating with lenders or banks.
- Small Business What skills do you need to negotiate a small business loan?
- Small Business What are the best practices for using a business loan to fund your startup?
- Financial Management How can you handle collateral substitutions in a collateralized loan?
- Practice Management How can you effectively use a small business loan to grow your practice management business?
- Corporate Finance What are the steps to structure a syndicated loan deal?
- Financial Management You're facing cash flow fluctuations. How do you choose between taking out a loan or cutting internal costs?
- Entrepreneurship How do you choose the best loan for your business?
- Banking Relationships How can you manage interest rate risk in a floating-rate loan?
Others also viewed
- The 5 C's of Business Credit Shannon S. Hayes 7y
- The 5 C's of Business Credit Myca Bamwesigye 3y
- Business Credit Myths Christopher Tomkins 8y
- A Simple Guide to Selecting the Right Business Loan Janette R. 8y
- Business Funding Programs Part 1 of 4: Funding Your Business With Term Loans Jennifer Carroll Bulgin 7y
- How to Get Bank Financing for Your Business in 3 Steps Financiario 2y
- Understanding the Impact of Inflation on Your Business Loan David S. Rodgers 3mo
- Why is capitalising interest a major plus for your client? Tim Bingham 5y
- 4 factors a banker will consider before lending you money Angela Wong-Liao 7y
- How to Negotiate a Better Deal on Your Next Business Loan Patrick Shurney 2y
Explore topics
- Sales
- Marketing
- IT Services
- Business Administration
- HR Management
- Engineering
- Soft Skills
- See All