Despite what you may hear in the news, we are providing loans to local small business owners who have the ability to survive and thrive in our challenging economy. Today’s low interest rates make this an especially good time to apply.
Before you do, review the following checklist:
1. Have you developed and maintained an ongoing business relationship with your banker?
Relationships count in the banking world. To effectively serve you, bankers need to understand your goals, anticipated financial needs and current financial situation. This level of understanding is best served with a continuous dialogue between the banker and you.
2. Does your business need a loan — or an equity infusion?
It’s important to understand the different between loans and equity. Loans need to be repaid over a defined time period. Equity investments are permanent funds that serve as “shock absorbers” so businesses can weather both good times and bad.
3. Can you clearly explain your firm’s ‘value proposition’?
You should be able to explain why customers should do business with you and how you’ll compete effectively in your chosen target market segments.
4. Do you have a business plan that covers best, most likely, and worst case scenarios?
We all know that things in life don’t always work as planned. Your banker should understand all three scenarios since you’re asking for the bank’s support through good times and bad. Developing alternative business plans shows your banker that you understand both the risks and opportunities of operating in your industry. It’s better to understand risks upfront and develop a game plan to deal with them before applying for a loan. Since your banker deals with many small businesses, he or she may have helpful ideas to help you survive and thrive in today’s challenging economy.
5. Have you developed at least two ways to repay the loan?
Bankers look for both a primary and secondary source of loan repayment. Primary sources of repayment relate to how much cash your business or investment is capable of generating. Secondary repayment sources could include pledging business or personal collateral, or a loan guarantee by the firm’s owners, suppliers or customers.
The more certainty that the banker has that the loan will be paid “as agreed”, the more likely that you will not only receive a favorable loan decision, but also the best interest rate.
Bank Midwest offers a number of small business loan products that we can tailor to fit many business financing needs.