How
Important Are ‘You’ When Applying for a Small Business Loan?
When you are applying for a
small business loan have you often wondered what Bank Managers look for when
deciding whether to support your request or not?
One of the key aspects is
you. If you are running a small business then more than likely the
business is really just you and probably not many other people. You may
operate under an impressive name or from glitzy offices but if it’s all down
to you then from the bank’s perspective ‘you’ are the key to a safe lending.
Here are just a few aspects
of a person's character which banks consider important.
What Is
Your Age?
Like it or not, age has to be
a factor in the credit assessment. If a businessman, particularly a one-man
band operation, asks for a loan repayable over 25 years and he's already 70,
the chances of him being around to see repayment are pretty slim! If he is
also the key person within the business who makes it all tick, then his loss
may have an impact on business performance.
On the other hand, a
spotty-faced 18 year old just out of school asking for $100,000 may not be
considered a strength either! Age is not a major problem but it is something
taken into consideration.
What Is
Your Level of Commitment?
A Manager can usually get a
feel for a person's commitment to the project or business in a variety of
ways. For example, it can come across in their language and the passion with
which they talk about the business. The Bank wants to see someone who is
both passionate and enthusiastic about the project, so you can see now why
it's important to look and sound confident.
A business owner's commitment
can also be measured in more tangible terms such as how much of their money
they are putting into the venture or alternatively how much they have
withdrawn from the business over the years. If the owner has regularly
injected cash into the business to help with working capital or to purchase
new machinery, then this is an encouraging sign. However, if cash is being
withdrawn on a regular basis for no apparent reason, then the Manager will
have to ask why, as it may not demonstrate full commitment to the business.
But what if only a small
amount of cash or no cash at all is being put into a new project? Well, if
you haven't got it, then you haven't got it! However, commitment can be
evidenced by the fact you are willing to pledge your house as security.
In the meantime, a question
to ask yourself is how does your commitment to the business look to an
outsider?
Seeing what the business
owner has put in, and what he's prepared to lose, will help the Manager come
up with a fair assessment of the person's commitment. Hopefully it's going
to be assessed more as a strength than a weakness!
Can You
Be Considered a Person of Integrity and Honesty?
This is a difficult one to
assess but we all pick up vibes about individuals within a few minutes of
meeting them. Things either ring true with you or they don't.
To back up his intuition the
Manager can often get information about someone from other people. Staff
within the Bank are sometimes a good source of information for Managers.
Every office has someone who seems to know everything about people in the
locality! These people are a fountain of knowledge!
If you have skeletons in the
cupboard, don't assume they won't come out! If they're bad enough they are
bound to surface and it can impact upon your chances of success.
What
Was The Source of Introduction?
In preparing your Business
Plan, or building your new business, you may decide you don't want to
present it to your own Bank for a variety of reasons
Having made the decision to
refer your Plan elsewhere, you have 2 options: you can either turn up cold
at the Bank of your choice, or you could ask a business colleague to
introduce you to their Bank (assuming they are happy with the service they
are getting).
If he knows you and the
skills you possess, he may be prepared to do more than point you in the
right direction; he may be happy to "vouch" for you. By doing this, he's
telling his Manager that, in his opinion, you have a good chance of success
and that you are worthy of support.
If your introducer is a
respected businessman and operates a good account at the Bank, then this
type of introduction could be considered as a strength, a positive point in
your favour.
You can see that in operating
a small business you are a very important asset where the Bank is concerned.
Make sure you capitalize on that when approaching the Bank for a loan.
Robert Warlow
©
Small Business Success
More information on dealing
with banks can be obtained from Rob's latest e-book 'The Secrets of Getting
Your Bank Manager to Say Yes!' at
http://www.smallbusinessloansecrets.com
If you are looking for ideas
and tips then subscribe to the free Small Business Success newsletter at
http://www.smallbusinesssuccess.biz
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