Articles Tagged ‘Borrow money’

How to Impress Loan Officers

Tuesday, December 20th, 2011

A recent Wall Street Journal article stated that banks are beginning to lend to the small business sector again; loan activity has actually picked up. Combine that with the slight improvement in overall economic conditions; you might think about putting your toes in the water and to see what is available in financing today. With that in mind, here are a number of things you should consider before approaching a lender for more money:

The things that will help you:

Be prepared. Come to the meeting with a financing package.

1. This includes company financial statements, tax returns, your personal financial statement and your personal tax returns from the last 3 years.
2. Know what you are going to use the money for: equipment, building, working capital and show what benefit that financing will do for your business (hopefully it will make you more money).
3. Have your company’s financial plan for the next 12 months defined in a projected profit and loss statement, balance sheet and cash flow forecast. Yes, it takes work; bit it also lets the lender know that you have thought this through and know where you are going. (Hint – nearly 90% of businesses don’t do this – so do you think that you will be ahead of the game by doing it? – YES)

Know your numbers. Be able to explain the key details of the things that happened in your company over the last 3 years that are reflected in your balance sheet and profit and loss statement. Examples would be:

1. Any changes in revenue – up, down or side ways.
Gross profit margin – deterioration, improvement or steady
2. Operating expenses – better than last year, worse, why?
3. NET PROFIT – financial statements should show improvement, if not be ready to clearly explain why.
4. Key balance sheet changes: debt to worth, working capital, current ratio, accounts receivable and inventory turns.

Communicate. Lenders use your financial statements as the report card on your performance as a CEO. Be ready to talk with them, show them around, get them involved, let them see your operations, talk with your people get connected with your business. People care about other people when they know about them and care about what they do. This is an element that cannot be effectively communicated with numbers on a piece of paper.

Your personal credit. Your personal credit is just as important as your business credit. Make sure that you are taking care of that! Pay your bills on time, keep your credit card balances at less than 50% of your line and be frugal. Your personal credit plays into the credit decision the lender will make.

These following things will NOT impress a lender:
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