At some point, nearly every business needs a loan. Here are some quick tips to help your experience with your banker go smoothly.
Involve your banker early
No one is more familiar with the loan process than your banker. Even if you’re only in the planning stage, reach out to your banker for guidance and information as you prepare. Preparation is key to managing the loan application process with confidence.
Establish a business plan and communicate it effectively
Demonstrate the thoughtful approach to your business with a plan articulating the nature of your business and how it’s operated. Include financial and resource management overviews, accomplishments and goals.
Understand your personal credit score
Until you’ve built a credit history for your business, your personal credit will serve as the predictor of how you’ll manage your business’s finances. Be prepared to answer questions about your personal credit score.
Prepare to address past financial challenges
How you’ve managed previous financial challenges is a predictor of how you’ll manage them in the future. With the benefit of hindsight, offer your banker some perspective on what you learned as you look forward.
Clearly articulate the purpose for the loan
You must be able to effectively put into perspective what the loan will help you accomplish by clarifying the specific purpose, goal and plan for how the money will be used.
Clarify how you’ll fund the down payment
You’ll need to produce an adequate down payment, if required, to demonstrate that your finances are sound, that you’re not borrowing above your means, and that you’re willing to assume some of the risk.
Bring up-to-date financials and information to the bank
Have your most current financial information available when visiting the bank to help move the process along. Contact the bank in advance to verify what’s required and offer to help obtain any additional information, especially in the event multiple partners are involved in the business.
Connect your banker with your accountant
Bankers and accountants speak the same financial language. Connecting the two can advance the process smoothly as they collaborate and keep you apprised of their efforts.
Facilitate post-loan approval activities
Due diligence continues after your loan is approved. Depending on your business type and how the loan is to be used, this may include an appraisal, environmental work, verification of good standing with the state, gathering articles of incorporation, etc., all of which takes patience and time.
Maintain a strong relationship with your banker
Stay in touch with your banker. Be responsive with information when needed and assist in removing any hurdles along the way.
Understand all the terms and conditions
Your bank loan’s terms and conditions specify how your loan is to be paid back, including when and how to make payments and on what date the loan amount is due in full. Make every effort to understand and meet all expectations.
This column is brought to you by The Huntington National Bank, Member FDIC. Scott Wolffis is Senior Vice President and Business Banking Area Manager at Huntington Bank. Reach him at [email protected] or (614) 899-8222.
