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When a small business needs capital, a small business loan from a bank comes first to mind. Banks want to lend to companies that achieved record profits for the operations, which generate sufficient cash flow to repay the loan, and that have enough collateral or assets to secure the loan. A clean credit record for both the company and the principals of the company is mandatory; few late payments, non-foreclosure or bankruptcy.

Most companies do not start with the quality of traditional bank financing, the founder did not have a personal net worth and income for the loan guarantee. And then the loan is really a personal loan instead of the founder of the business loans

Achieved with the bank that you have your accounts with the person who deals with business or commercial loans. You will be asked to provide financial statements for both you and your company for the last several years as well as tax returns. You may also be asked to provide documentation as to the accounts you have, both personal and business. A business plan will be needed and you will most likely have to complete the bank’s own loan package.

You will have to personally guarantee the business loan, which means any and all assets you have will be pledged to pay off the loan if your business doesn’t. If you live in a community property state, your spouse must also personally guarantee the loan.

First Tips

To obtain a bank loan takes too long, as is the case with any form of financing. Start the search for a loan several months, at least, in advance of when your company needs the capital.

Second Tips

In the search for a bank loan, you are really approaching a vendor (the bank) to see if you want to buy his product (money). Don’t approach the situation like a starving peasant who desperately needs food (funds) to stay alive. The bank needs you or it has no revenue (except of course for the exorbitant amount of interest it earns on VISA cards).

Cash (flow) Is King

Before approaching a banker about a loan, it must be to prepare a detailed cash flow forecasts to determine the size of capital you need, and how and when the loan will be repaid. To the banker, the cash flow forecasts financial and historical data is of the utmost importance. Capital project has lofty goals for the relationship with your company to earn a great return on a variable rate over a period of time. He may cash out of the business in 3 years, maybe 5, but in any case, he wants to create great wealth out of his participation in your company. The banker has more modest goals to earn money with a specific interest rate, but it is more concerned about the timing to obtain the benefits and the origin of the points you in advance in a timely manner and in protecting his original investment. The banker, too, responds to forecasts that are realistic and containing detailed assumptions. Just as the venture capitalist tires of reading Business Plans with ridiculous or unsubstantiated projections, the banker appreciates well thought out numbers grounded in reality.

About Your Business

You should also prepare a plan of action for the type of the company to enable the bank to a better understanding of your business. The Business Plan is your marketing tool again, as with this capital project. It also shows your bank in the planning and organization of the company – which would enhance the skills of your ability to pay it back.

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