Last week I had lunch with a business banker who is interested in getting to know me and my clients. I was reminded of my initial business banking relationship, at a time when I didn’t understand the value of that relationship. While building Making It Big, I learned that partnering with a bank that had an interest in supporting businesses like mine was very important and when providing high touch service is part of their culture, it leads to long term relationships and that is the best fit for any small business.
As a business consultant, one of my primary responsibilities is assisting my clients to do what it takes to obtain financial support through traditional banking relationships. I am very good at doing this because I learned how to do it for myself back in the day when my business was always in need of more money. Once I had burned through my financial resources and those of willing family members, I turned to the bank. My good fortune was doing business with a bank that served entrepreneurs and understood the cash flow needs of a growing endeavor and having a banker that was interested in me and my business.
Most people don’t realize that all banks are not the same; their levels of service vary greatly, the fees are always negotiable, and their ideal clients span a wide spectrum. I often make banking recommendations to my clients based on my knowledge of their business in effort to pair them with a bank where the outcome will likely be positive. It takes preparation to borrow money, whether it is a Line of Credit (LOC), a term loan or an SBA loan. It is important to know that banks will generally not lend to startup ventures so in order to borrow, you need to have a financial track record that the bank can evaluate.
I have a 100% success rate in getting bank money for my clients when the client partners with me and follows my lead and direction. It is not always with the first bank or on the first try, but within a reasonable window of time, the necessary financing will be in place and at a good price. Each type of borrowing has specific requirements and those might vary from bank to bank, but there are some basics most banks want to see.
What You Can Do to Get a Bank Loan
1. Make the decision to bring your business into a better place, reduce your cash flow woes and/or position yourself for future borrowing.
a. Developing a banking relationship even if you don’t “need” the money right now will bode well for your business. Having a borrowing track record makes banks very happy and enables them to support a bigger ask in the future. In the event you find yourself in a cash flow crunch, it is great to have a LOC in place to support you through the tough times and not be scrambling to borrow in the midst of not having money. Banks are more likely to support you when you are in a good financial position so think forward and position yourself for success.
2. Do your research. Interview some bankers. Find out who is a good fit for you, both the bank’s culture and the banker.
a. Remember, talk is cheap and bankers are sales people. If you are leaning towards a bank, ask them for references. Find out who banks with them that started when they were your size or who is comparable to where you are now.
b. Find out what the bank’s criteria for lending are. Each bank has their own spin on what they need, how far back they want you to go. If you get clear direction, you will know what you need to get in place to get funding.
3. At least two years of clean financial statements (Profit and Loss and Balance Sheet) that show profitability are standard.
a. I have worked with many women who had no financials or inadequate financial records, poor financial management, a history of bounced checks, debt every which a way and I have helped them get positioned to borrow money.
b. The bank is banking on your ability to repay the loan and this assurance will come primarily from evaluating your financial statements.
4. You will be more likely to get bank support if you appear knowledgeable about your financials and can explain the why, what and when.
a. As much as banks like your financial statements, they also want to know you have a clear picture of what you are doing and what it will take for you to follow through on your commitment to repay.
b. Part of working with a consultant is to bring you into the loop of understanding your business from a financial point of view and learning about financial cause and effect.
5. If you are in need of an SBA loan, you’ll need to write a full blown business plan with excellent cash flow projections. The bank focuses on how and when you are going to pay them back.
a. I partner with a business plan writer to get funding for my clients. I recommend you hire an expert with a proven track record to write your plan or at least the financial part to increase your chance for success.
6. Don’t go it alone if you know it is not your wheelhouse of expertise. Ask your bookkeeper, CPA, or consultant to help you and guide the process. Or, if you already have a great banking relationship, ask your banker for help.