When your business has a funding need, the question of whether to utilize business assets or to borrow funds will undoubtedly arise. As a business owner, you will need to make these decisions to successfully operate or grow your business.
An experienced business banker can help you decide whether using existing capital or borrowing funds – either with a commercial bank loan or via financing available through the SBA – is best, given your financial situation.
If you think a business loan may be in your future, familiarizing yourself with good borrowing practices is a great place to start. Here are tips for a successful outcome if and when the time comes to submit an application.
- Legitimate business purpose – One of the first questions lenders will ask is, “What are you looking to purchase or finance?” The practicality of the purchase will be assessed in terms of strength, opportunity, and risk. Because every loan carries a risk, be prepared to explain the goals and objectives for your loan, as this will help the lender determine if a commercial loan is the right fit.
- Be realistic – Consider how much money is actually needed to grow the business, and how much money the business can realistically afford to pay back each month. Creating a well thought out budget supported by financial projections will help ensure you request an accurate amount for your lending needs.
- Consider character – Lenders aren’t looking for the “perfect” borrower – because there aren’t many of them. Business bankers want to make sure they’re lending to business owners who will make good on the business debts. Your personal credit score is how lenders judge your reliability and, while it’s always best to have an excellent credit score, today’s lending environment is more open to subpar credit ratings—instead focusing on the strength of your business and your character rather than on your credit score.
- Lay the foundation – Beginning the lending process is as easy as reaching out to your local community bank. It’s important to build a relationship with your lender before you need a loan, as initial conversations help the lender understand your commitment and your business. It’s also critical to gather appropriate documentation for your request including financial statements, projections, and a copy of your personal credit report.
It starts with the relationship
Your relationship with your business banker can last years, so it’s important to be comfortable with them, their business values, and the other financial services they offer. One thing that distinguishes local community banks from other financial institutions is the customer-focused approach to commercial lending.
Regardless of the size of your business, by choosing your community bank for your commercial lending needs, you will benefit from local decision making, personalized service, and expertise.
With an independent spirit and financial strength, Citizens Bank has been doing what’s best for local business for 128 years. We have the capital and liquidity to meet the credit needs of our clients, both big and small – now and in the future.