5 Things Your Small Business Can Do to More Easily Secure a Loan
Whether you’ve been working for years to expand your business or you’re just getting started, loans are essential for taking your ideas to the next level. However, it’s important to remember that every loan is different because every company is different. Even if you own a small business, it doesn’t feel small to you – it’s everything. And sometimes you need money to make money.
So what’s the secret? Keep reading to get the scoop:
Most small business owners enter into the lending process with a strong idea of where their company stands financially. They’ve crunched the numbers, done the math and think there’s no way they won’t be approved. But what some fail to consider is that there are many variables at play when it comes to getting a loan request approved, and preparation is key.
When it comes to reviewing a loan request, banks consider five things:
Who is the person behind the business? Who is going to be guaranteeing the loan? Think about the individual from a banker’s point of view. What’s their credit score? Do they have a desirable debt to income ratio, as well as liquidity? Similar to how you want an executive to be the face of the company, find the right person to be the face of your loan.
Cash flow is very important. Make sure you have the capacity to repay your obligations, and be ready to explain your strategy.
At Beneficial, they value when a company shows vitality. First, they look at the equity down payment from the borrower to purchase real estate, equipment or a business. Second, they examine the equity and earnings that a borrower retains in the business.
Other than cash flow, collateral is often times a bank’s secondary source of loan repayment. It’s wise to provide banks with a first lien position that has net coverage of at least the amount of the loan requested.
Finally, a lender will look at the structure of the loan. It needs to make sense for both the lender and the borrower. As previously stated, if the purpose of the loan is clear and the borrower and lender’s goals are aligned, it will be favorable to building a successful lending relationship.
Still have questions? Reach out to Beneficial Bank to discuss securing a loan for your small business. Beneficial Bank, Member FDIC, is an Equal Housing Lender. All loan products subject to credit approval.This is a paid partnership between Beneficial Bank and Philadelphia Magazine's City/Studio