If you’re the owner of a small business and you’re thinking about obtaining a loan or a line of credit; WAIT – until you’ve read these tips.
We often have small business owners come to us to borrow – for various reasons. These entrepreneurs have the best intentions of presenting their business in a way that gets them the loan. But when they’re missing valuable information it makes it harder for us to help.
Here are 3 tips to help you help your lender say Yes!
1 – Have an accountant prepare financial statements for your business
It’s important you hire an accountant to prepare proper financial statements. Think of financial statements as another tool for your business. This tool can help you demonstrate how strong your business is and that your business has the means to support a loan.
This extra cost can actually save you money in the long run. Accountants are trained on how to properly manage finances and could provide you with some invaluable advice on tax and succession planning.
2 – Be clear about all aspects of your business and personal finances
In small business lending, a lender needs to understand the “big picture” in order to proceed with an application. Small businesses are heavily influenced by the owner(s) and it’s important for a financial institution to have a solid understanding of every aspect of the business and the individual owner’s financial obligations.
You should be prepared to answer numerous questions about your business and personal finances, as well as have proof to back up your statements. Some questions that may come up are:
How long have you been in business? Be very specific and provide a brief history on how/why you started your business.
What exactly do you do? It’s very important to be as detailed as possible when you explain what your business does and what it all entails.
Example: “I work in the forestry industry and haul logs” Who do you haul logs for? Do you have a contract with the company? Do you own your trucks? How many do you own?
Do you have other household income? Do you have other personal debt? In order to get the “big picture”, your lender will want to know all aspects of your personal banking to ensure that your business is able to meet all of your obligations. Be prepared to provide detailed information on both your personal and business finances, as well as provide supporting documentation (ex. personal tax returns, notice of assessments, business financial statements).
3 – Explain the reason for the loan
A requirement of your application is to know the true purpose of the credit facility. Whether it’s for a vehicle or a commercial property, your lender is going to want to know all of the details. In order to impress your lender and speed up the process, bring every bit of information you have on the item you would like to purchase and/or put up as security for your loan. Quantify as much as possible in your first appointment with documents like a purchase agreement, appraisal, BC assessment, insurance papers, etc.
We offer a wide range of just-right financing to help your business succeed. If you’re ever looking for advice on your next small business loan, be sure to ask one of our representatives! We are always here to help.