Depending on the type of small business you own or operate, you may need third party financing. One of the most common sources of financing is a bank loan, however securing one is no easy endeavor. Luckily, there are steps you and your company can take to become more bankable.

1. Securing a Small Business Bank Loan – 3
Things You Can Do To Help
Depending on the type of small business you own or operate, you may need third party financing.
One of the most common sources of financing is a bank loan, however securing one is no easy
endeavor. Luckily, there are steps you and your company can take to become more bankable.
First, it’s good to understand what criteria banks will look for during the application process. You
must:
 Operate at a profit
 Be accurately defined as a small business
 Do business in the United States
 Have invested equity
 Use alternative financing (such as personal assets) before seeking the loan
 Be able to demonstrate need
 Use the funds soundly
 Not be delinquent on any outstanding debts
 Have a strong credit score (varies by lender)

2. While many of these are not in your control, some are. Keeping your debts low and your credit
score strong are two of utmost importance, and demonstrating both your need for the loan and the
fund usage are keys to your bankability. Here are four things that you can do:
1. Tighten up your financial records. You’ll want a strong balance sheet and you’ll need a
detailed report of your spending. There are tools, such as QuickBooks, that can help you
keep track of your finances. Also, a CPA can be instrumental in keeping your finances in
check with state and federal government tax requirements. Strong financial records will help
keep you from being delinquent on debts and will ultimately help build your credit score.
2. Factor your receivables. Invoice factoring, sometimes called accounts receivable financing,
is when you sell your invoices to a third party company called a factor. The factor will
advance you a large percentage of the invoice amount quickly – usually within 24 hours –
and then the balance, minus a small factoring fee, once your customer pays the factor.
Invoice factoring is great for small businesses because it improves your cash flow. You can
pay bills, invest in capital equipment to help grow your business, or just maintain a healthier
check book – all things that a lender will likely look for.
3. Prepare a business plan. A strong, detailed business plan will help you show a lender your
need for the loan and how you plan on using the funds. Here’s a quick outline on how a
business plan might be organized:
◦ Business Profile (type, location, product or service, sales history, competition,
customers, suppliers, other general operational information of value)
◦ Management and their experience (you and your team)
◦ The Pitch (detail on loan needs and why it’s a good investment)
◦ The Payoff (how the loan will be paid back)
◦ Executive Summary (short conclusion on why doing business with you is a smart idea)
◦ Executive Summary (summarize your business, background, amount of loan needed and
why, along with how you plan on repaying the loan)
With strong documentation, a smart, well-built business plan, and a healthy financial track record in
place, you and your small business should be well on the way to securing a needed bank loan from
just about any lender.
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