By Bennie the Bean Counter From afar, the commercial lending process may appear comical. On one side of the desk you have the lenders, who want to manage their risk by loaning money to only successful business owners. On the other side of the desk, you have the business owners — many of whom believe they can’t truly become successful until they get the money!
To avoid this disconnect, you have to approach business financing as a partnership rather than a provider-customer relationship. If you were going into business with someone, you’d want to clearly understand his or her vision for your venture. It’s the same with lenders.
What’s the plan?
For example, say you’re asking for money because your company is so far behind on vendor payments that it needs the working capital to catch up. In this scenario, you’ll need to make a case for how catching up on payments will allow you to get the raw materials needed to make a big push forward on sales. You need to show that your business is bankable. Find out how.
Or, as another example, you need money to open a new location in a city nearby. Here, you’ll have to produce some solid market analysis that explains to the lender why your business stands a good chance of succeeding in a new locale.
How shall you put it?
Before you ask for a loan, devise a clear plan for what you want to do with the money and how you’ll repay it. You and your top managers should be able to verbally articulate your plan, but draft a written statement as well.
The written statement doesn’t need to be a 50-page proposal bound in embossed leather. It can be one page as long as it clearly describes your strategic challenge, your plan for overcoming it, and where and how the lender’s money plays into this solution. This is why building a solid relationship with your bank is critical. Learn how.
Need some help?
The lending process can be daunting and, at times, frustrating. Alerding CPA Group can assist you in gathering and presenting the right financial information to secure the necessary working capital. We can be reached at 317-569-4181 or www.alerdingcpagroup.com.
This post was written by:
Bennie the Bean Counter
Bennie is a nose-to-the-grindstone CPA who has one simple goal – helping our clients and visitors. Check out Bennie’s Bits under our Blog section. Bennie posts answers to frequently asked tax questions keeping you informed of any new and updated information. He regularly updates his page, so be sure to check back often.