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What You Will Need to Get Business Capital from a Bank

Posted on October 20, 2014 in Banking Issues

If there is one thing that new business professionals have a hard time with, it is preparing to ask for a loan from a bank. A new entrepreneur needs to remember that a bank is not just loaning you money. The bank is investing in your business and the bank wants to feel comfortable about that investment before approving the loan. That means that the bank takes your capital loan very seriously, and so should you. There are several things that you need to do before you apply for a working capital loan from a bank, and you should be prepared to do your homework if you want that capital investment.

Before you start collecting information, you need to line up banks to talk to. Local and online banks are both excellent options. With an online bank, you can research everything you will need to have ready beforehand by looking at the bank's website and finding the information you need. With a local bank, you should call and ask to speak to a bank loan officer. When you get a loan officer, make an appointment to discuss your capital needs and find out from the officer what materials you will need to bring to the appointment to get the application process started. The more research you do up front, the faster the application process will go.


Work Through The Application First

The bank will start its investigative process with its own application, so that is where you should begin as well. There is no shame in admitting that the bank's capital loan application is confusing, which is why you should not hesitate to hire an accountant to help you understand the application. Your other option is to go into the initial meeting with the loan officer with your application questions ready to go, but that is going to slow down your process. An accountant can give you the explanations you need and he can also suggest the best ways to present the information that the application is looking for.

Always make at least one copy of the application before you start filling it out. This will allow you to use one copy as a rough draft where you will make mistakes, and then transfer your final information to the good draft. It may help to make more than one copy as you never know how many times you will make errors on your application. It may not seem important to you, but a clean and legible loan application is extremely important to the bank. If the bank cannot read your application, then it is not going to be able to approve your capital loan.


Your Company's Credit History

It is going to be almost impossible to get your business approved for bank capital funding without first establishing some kind of corporate credit history. There is an involved process that goes along with establishing a corporate credit history and this may be something that is best served by hiring a business consultant. Establishing a credit history for your company can take time, but it is not exceedingly difficult if you find the right vendors to work with. A reputable business consultant can show you how to set up your corporate credit profile and then point you towards vendors that can help you establish business credit.

It is a good idea to have a few years worth of corporate credit history associated with your business before you ask a bank for capital financing. Remember that the bank is going to be investing in your company and the bank will want to see reasons why your business is a good investment. A history of good credit decisions is one of the criteria the bank will use to determine if your business has the stability necessary to warrant a capital loan. Check your business credit profile regularly and make sure that the information on that profile is accurate before you apply for a capital loan.


Bring Your Updated Business Plan

If you are running your company without an updated business plan, then you are running your company blind. Your business plan is the road map you use to get your company off the ground and it is also the guide you turn to when you have to make tough business decisions. Your business plan outlines the direction your company will take and it determines whether or not your company will get involved in new business ventures. A good business professional updates his business plan quarterly to compensate for any changes that the business may have experienced. A successful business is dynamic and able to adjust to the changes that take place in its industry, and those changes are reflected in the company business plan.

Your business plan is also the brochure you use to get approved for capital loans from banks. This is the document that gives revenue projections for the coming years, it has the company budget, and it also has all of the information your company has collected about consumer and competitor trends. This is the document that tells the bank exactly how much you know about your industry and how much revenue you expect your business to generate in the coming years. A well-written business plan can mean the different between getting the capital loan you need, or having to find an alternative way to fund your business.


Use Bank Capital Loans Wisely

Look around and find the best deal you can with a lender that you can trust. Remember that a capital loan is just one step on a long journey and it would be nice to have the confidence of a lender on your side as you move forward. When you go to talk about a capital loan with a bank, always have the specific reason for your loan detailed in a comprehensive report you prepare for the bank. When the bank knows exactly what you need the money for and how you intend to use it, then it becomes much easier for the lender to approve your funding and help your company grow to the next level.