Be prepared for your next loan request

If you're to be successful in getting a bank loan to help finance your small business, you must understand what the loan officer is looking for. Generally, bankers require the most information from a first-time borrower. Unsecured loans usually require more proof of repayment ability than secured loans, and loan packages become more detailed as the size of the loan or its term increases.

what a banker might look for when evaluating a loan applicant

• Your level of experience. Do you have the education or practical experience necessary to make your business a success?
• Your personal credit history. The bank may insist on a personal security for a first-time borrower. You may have to pledge personal assets such as real estate or other valuables.
• Your company's liquid assets. What is your business' ability to meet short-term debt from working capital?
• Your profitability. The bank will want to evaluate past and current operating statements and balance sheets. Also, projections of long-term profit and loss and a cash flow analysis will probably be required.

Getting a bank loan is not always easy

Here are some steps to take in order to be prepared and to increase your chance of success:

• Establish a sound personal credit record. Use credit to deal with local sources. Have and use a credit card and make monthly payments promptly.
• Establish and maintain a relationship with your banker. Keep your banker informed about the state of your business. Show him or her occasional operating statements, balance sheets, or sales records.
• Keep your business records current and in good shape. You will always be prepared to make a loan request as soon as you need it.