Financing A New Business

Financing A New Business?

Tips on how to prepare a finance request for the best outcome. 
If you’re starting, growing or restructuring your business, you may need financing. If you do, preparation is key to success. The following points are a guideline to help you understand what a bank will ask for when applying for a commercial loan.

  • Do your homework first. That is, create a plan that takes you where you want to go. While a good banker should be consultative, the opportunity (or problem) is ultimately yours to mold (solve).

  • A business plan covering your company's products, services, target market and how you will reach it, competitors, employees and financials is likely to be required in some form and can play a very important role in obtaining financing. It is also your working document on the journey. Don’t worry about how fancy it is, but be sure that it is thorough, well researched and realistic.

  • Enlist a personal group of advisors (banker, CPA, attorney, experienced business owners, investors, mentors, etc.). Once operating, consider sharing your financials and meeting regularly. We are never too experienced to learn.

  • Do not hire out financial projections completely. You should include assumptions and be able to explain each one. Plan to do year one month by month and the next years (at least three total) annually for startups, acquisitions or major expansions.

  • Don’t say you have no competitors and explain why you are better than the competition.

  • Consider investing in a professional market study. In this day of the Internet, business can dry up quickly and consumers are demanding.

  • Know your credit score and think about your lifestyle–will your personal income go down during the process, will you have to cut back, will you have to sell anything or pledge anything, do you have benefits?

  • Ask for a specific amount, explain where it is going to be spent, provide good descriptions of collateral and be very specific in how you will be able to pay it back and in what time period. When a lender sees a thorough, convincing, intelligent plan, you’re far more likely to get that loan that you need. 

  • What kind of equity will you start with? You can never have too much! But you can have too much debt.

  • Working capital–make sure you have enough today and at least 6-12 months into the future.

  • Be prepared to personally guaranty business loans.

  • Consider what the end looks like–is the business saleable or transferrable?

With a solid loan proposal and an understanding of the process, there’s a good probability your financing request will receive approval. If you have any questions about applying for a business loan, contact our business loan team and we’ll be happy to assist you. 

Author: Sarah Napgazek
SVP, Loan Operations