How important are “you” when applying for a small business loan?

When applying for a small business loan, you’ve often wondered what bank managers look for when deciding whether or not to support your request?

One of the most important aspects is you. If you run a small business, then most likely the business is really just you and probably not many other people. You can operate under an impressive name or from glittering offices, but if it’s all down to you, then from the bank’s point of view, “you” are the key to secure lending.

Here are just a few aspects of a person’s character that banks consider important.

How old are you?

Whether you like it or not, age must be a factor in the credit check. If a businessman, especially a one-man band operation, asks for a loan that can be repaid over 25 years and he is already 70 years old, the chances that he can see a repayment are quite slim! If he is also the key person within the company who makes everything work, his loss can have an impact on business development.

On the other hand, a spotty 18-year-old who just comes out of school and asks for $100,000 can’t be considered a strength either! Age is not a big problem, but it is something that is taken into account.

How high is your commitment?

A manager can usually get a sense of a person’s commitment to the project or business in a variety of ways. For example, it can come across in their language and the passion with which they talk about the business. The bank wants to see someone who is both passionate and enthusiastic about the project, so now you can see why it’s important to look and sound confident.

A business owner’s engagement can also be measured in more tangible terms, such as how much of their money they invest in the company, or alternatively, how much they’ve retired from the business over the years. If the owner has regularly invested money in the business to help with working capital or buy new machinery, then this is an encouraging sign. However, if cash is regularly withdrawn for no apparent reason, the manager needs to ask why, as he may not show full commitment to the company.

But what if only a small amount of cash or no cash at all is put into a new project? Well, if you don’t have it, then you don’t have it! However, commitment can be proven by the fact that you are willing to pledge your home as collateral.

In the meantime, one question you should ask yourself is what your commitment to the business looks like to an outsider.

Seeing what the business owner has put into it and what they are willing to lose will help the manager make a fair assessment of the person’s commitment. Hopefully it will be judged more as a strength than a weakness!

Can you be considered a person of integrity and honesty?

This is hard to judge, but we all pick up vibrations about individuals within minutes of the meeting. Things either sound true to you or they don’t.

To substantiate his intuition, the manager can often get information about someone from other people. The bank’s employees are sometimes a good source of information for managers. Every office has someone who seems to know everything about the people in the area! These people are a source of knowledge!

If you have skeletons in the closet, don’t assume they won’t come out! If they are bad enough, they will inevitably pop up and it can affect your chances of success.

What was the source of the introduction?

When preparing your business plan or building your new business, you may decide that you do not want to present it to your own bank for various reasons.

After you’ve made the decision to refer your plan to another location, you have 2 options: you can either show up cold at the bank of your choice, or you can ask a business colleague to introduce you to their bank (assuming they’re happy with the service they receive).
If he knows you and the skills you have, he can repent ofbe it to do more than point you in the right direction; He can look forward to “vouching” for you. In this way, he tells his manager that in his opinion you have a good chance of success and that you are worth supporting.

If your importer is a respected businessman and runs a good account with the bank, then this type of introduction could be seen as a strength, a positive point in your favor.

You can see that when you run a small business, you are a very important asset when it comes to the bank. Make sure you benefit from it when you contact the bank to get a loan.

Robert Warlow
Success in small businesses

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