What Business Lenders Look For When Approving Business Loans
10 Things Banks And10 Things Banks And
Business Lenders Look ForBusiness Lenders Look For
When Approving BusinessWhen Approving Business
By Business Money TodayBy Business Money Today
Small Business FinancingSmall Business Financing
• Banks and other small business lendersBanks and other small business lenders
just want to get repaid.just want to get repaid.
• Easy credit is gone in most instances.Easy credit is gone in most instances.
• Start up businesses are out of the loop.Start up businesses are out of the loop.
10 Thinks That Traditional Lenders10 Thinks That Traditional Lenders
Look For In Business LendingLook For In Business Lending
• Before the financial crisis, if your businessBefore the financial crisis, if your business
wanted awanted a business loanbusiness loan, many lenders, many lenders
modified their policies to accommodate.modified their policies to accommodate.
• Not anymore – you have to modify yourNot anymore – you have to modify your
business to meet their policies.business to meet their policies.
• Top 10 items banks and other smallTop 10 items banks and other small
business lenders look for --->->->->->business lenders look for --->->->->->
1 - What Is Your True Need?1 - What Is Your True Need?
• Many small businesses only seekMany small businesses only seek
business financing when they have a cashbusiness financing when they have a cash
flow problem.flow problem.
• Lenders look for specific needs likeLenders look for specific needs like
working capital, equipment, real estate,working capital, equipment, real estate,
inventory – specific needs.inventory – specific needs.
• Can’t get a business loan just to haveCan’t get a business loan just to have
money – not any more.money – not any more.
2 - Amount Requested2 - Amount Requested
• A fine line between your request and whatA fine line between your request and what
banks will lend.banks will lend.
• Banks want to approve big loans – thoseBanks want to approve big loans – those
over $100,000.over $100,000.
• They will also only approve the amountThey will also only approve the amount
that your business can afford and justify.that your business can afford and justify.
3 - Use Of Funds3 - Use Of Funds
• Banks and other private business lenders
will not just give you money for money’s
• What you use those funds for matters -
based on different loan products.
• Easier for lenders to control the use of their
4 – Other Debt4 – Other Debt
• How leveraged are you – both you and your
• Are you getting loan after loan but not
growing your business?
• Can you pay the new loan as well as all
your other debt – personal and business?
5 – Your Business Standing5 – Your Business Standing
• How is your business perceived in your
• Are you current on all obligations – e.g.
with your landlord, taxes, vendors – and
even those items not reported on your credit
• Is your business thought of and ran as a
6 – Credit History6 – Credit History
• Do you pay all your obligation?Do you pay all your obligation?
• Have you done so in the past?Have you done so in the past?
• Can the lender be assured that you willCan the lender be assured that you will
continue to do that – no matter what –continue to do that – no matter what –
going forward?going forward?
7 – Financial Statements7 – Financial Statements
• Two reasons financial statement matter in
the loan process.
• To determine the financial wherewithal of
•To see if your business is being managed
properly – i.e. full, complete and audited
8 – Source Of Equity8 – Source Of Equity
• No matter the loan type or the source –No matter the loan type or the source –
you have to provide some form of downyou have to provide some form of down
• Either your own money or some equity inEither your own money or some equity in
what is being purchased with the loan.what is being purchased with the loan.
• Most require 20% down – it is already partMost require 20% down – it is already part
of the underwriting – while commercial realof the underwriting – while commercial real
estate may require more.estate may require more.
9 – How You Get Paid9 – How You Get Paid
• If you have to show that you can repay aIf you have to show that you can repay a
loan, then you also have to show how youloan, then you also have to show how you
get paid – how you earn that revenue.get paid – how you earn that revenue.
• Some loans – asset based or revenueSome loans – asset based or revenue
based – are solely based on how yourbased – are solely based on how your
business get paid.business get paid.
• Alternative Loan – even banks provideAlternative Loan – even banks provide
alternative loans.alternative loans.
10 - Revenue10 - Revenue
• The most important item that yourThe most important item that your
business can have is revenue!business can have is revenue!
• Banks and lenders just want to get repaidBanks and lenders just want to get repaid
and you can only do that with revenue.and you can only do that with revenue.
• Not just any revenue – but enoughNot just any revenue – but enough
revenue to cover your business expensesrevenue to cover your business expenses
and the new loan.and the new loan.
Getting Your Business LoanGetting Your Business Loan
• Banks and other small business lenders justBanks and other small business lenders just
want to get repaid.want to get repaid.
• Thus, if you want to know what they look for inThus, if you want to know what they look for in
approvingapproving business loansbusiness loans – they look to get– they look to get
• And, they don’t look for ways to make it work –And, they don’t look for ways to make it work –
but ways that you won’t make it work.but ways that you won’t make it work.
• Take those away and they have no choice but toTake those away and they have no choice but to
approve your request.approve your request.