Before you walk in to talk to a baker about a loan you should be prepared.  Your first meeting with a banker is a very important one.  The more prepared you are up front the better your chances of securing the loan.

First before applying for a bank loan prepare yourself by answer these questions:

What Do You Need The Money For?

You have to be prepared to tell the banker what you will be using the money for.  You have to be very specific.  The items you chose to use the money for should advance the business by generating revenues that will enable you to repay the loan.  Some of the things that you can specify are as folows:

How Much Money Do You Need:

You should know how much money you need.  It should be a specific amount.  State the specific amount such as $50.000, $150,000, $250,000, etc.  Ask for what you need because you will have to justify it.  Don’t ask for more than what you need.

What Terms Are You Looking For (How Long Will It take You to Pay It Back):

Based on your income level and growth projections you should know exactly how long it will take you to repay the loan based on the amount of the loan.  This period be specified as a specific number of years such as 2 years, 5 years, 10 years, etc.

How Long Have You Been In Business:

Bankers want to know how long you’ve been in business because it gives them a sense of comfort knowing that the business have gone thru certain critical phases and has withstand the test of time.  Business that have a proven track record and are still standing after many years are attractive to bankers.

What Is The Current Financial Shape of Your Business:

The banker will want to know what is the company’s current debt and to whom does it owe money.  If money is owed how much longer before the loan is repaid.   They also want to know if the company have positive cash flow.  They want to know if there is more money coming in than there is going out. 

What Collateral Do You Have:

Will you be using collateral to secure the loan.  If so know what collateral will be used to secure the loan.  Banks prefer collateral that will allow them to recoop their losses in the eventuality that you can’t repay the locan.  Collateral could include, real estate, the finished product, expensive machinery, etc.

How Soon Is The Money Needed:

Be prepared to state how quickly you will need the money.  You may have to explain why you need the money within that timeframe.  Be prepared to state why.  It could be that you have a specific timeframe to secure a manufacturer, or the machinery that you will purchase will no longer be on sale after a few days, or you need to get your products produced and in stores at a certain timeframe in order to meet the seasonal timeframes, etc.  Whatever, the reason be prepared to articulate it to the banker.

When Will The Business Become Profitable:

Bankers may also want to know when will the business beocme profitable.  A busienss with the prospects of becoming profitable in the near future will be more attractive to a banker.  Be prepared to show when the business will become profitable.

Will You Use Your Personal Credit Record or The Business Credit Record:

You have to decide whether you will use your personal credit record or the business credit record to apply for the loan.  If you borrow money based on your personal credit it could be reported as business credit and then as personal credit if there are late payments on the loan.  Also, having your personal credit checked could impact your credit record.  In the early stages of a business where there is no established business credit record entrepreneurs are forced to use their personal credit to secure a loan.