Is A Loan A Good Idea For Your Business?
by Debi Enders
So, you’re thinking about investing in your business – maybe moving to a larger location or updating your equipment – and it’s going to take more cash than you have on hand. You’d like to take out a small-business loan to fill the gap. And you’re wondering: Is that a good idea? Look at these indicators of small-business loan success. Do you have:
1. A strong track record? Your personal résumé and credit score will figure heavily into any lending decision. So make sure your résumé demonstrates your success in running your business, and do what you can to bolster your credit report before you apply for a business loan. If your credit score is lower than you’d like, be prepared to discuss with your banker how it got that way and what changes you have made.
2. Accurate financial statements? Your monthly profit-and-loss statements tell the story of how cash flows through your business. They demonstrate how you navigate any peaks and valleys to make promised payments. They also indicate professionalism. Incomplete or inaccurate financial statements are not a sign of a well-organized company.
3. A credible business plan? When you ask for a loan, your banker will likely ask for an up-to-date business plan if your company is less than 3 years old. So don’t wait to be asked. A formal business plan sends the message that you have done your homework and have a solid plan for growing your business and repaying your loan.
4. A clear understanding of what you need? Are you seeking a term loan to pay for a new delivery truck? Or perhaps a revolving line of credit to finance inventory? The better you can articulate how the funds you seek will be used and paid back, the better able your lender will be to tailor a financing product to meet your needs.
If you can say yes to all these questions, you may find your banker will say yes to your loan.
Debi Enders (debi.enders@commercebank.com) is vice president, small business banking at Commerce Bank.