When you are applying for a small business loan have you often wondered what Bank Managers look for when deciding whether to support your request or not?
One of the key aspects is you. If you are running a small business then more than likely the business is really just you and probably not many other people. You may operate under an impressive name or from glitzy offices but if it’s all down to you then from the bank’s perspective ‘you’ are the key to a safe lending.
Here are just a few aspects of a person’s character which banks consider important.
What Is Your Age?
Like it or not, age has to be a factor in the credit assessment. If a businessman, particularly a one-man band operation, asks for a loan repayable over 25 years and he’s already 70, the chances of him being around to see repayment are pretty slim! If he is also the key person within the business who makes it all tick, then his loss may have an impact on business performance.
On the other hand, a spotty-faced 18 year old just out of school asking for $100,000 may not be considered a strength either! Age is not a major problem but it is something taken into consideration.
What Is Your Level of Commitment?
A Manager can usually get a feel for 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 you can see now why it’s important to look and sound confident.
A business owner’s commitment can also be measured in more tangible terms such as how much of their money they are putting into the venture or alternatively how much they have withdrawn from the business over the years. If the owner has regularly injected cash into the business to help with working capital or to purchase new machinery, then this is an encouraging sign. However, if cash is being withdrawn on a regular basis for no apparent reason, then the Manager will have to ask why, as it may not demonstrate full commitment to the business.
But what if only a small amount of cash or no cash at all is being put into a new project? Well, if you haven’t got it, then you haven’t got it! However, commitment can be evidenced by the fact you are willing to pledge your house as security.
In the meantime, a question to ask yourself is how does your commitment to the business look to an outsider?
Seeing what the business owner has put in, and what he’s prepared to lose, will help the Manager come up with a fair assessment of the person’s commitment. Hopefully it’s going to be assessed more as a strength than a weakness!
Can You Be Considered a Person of Integrity and Honesty?
This is a difficult one to assess but we all pick up vibes about individuals within a few minutes of meeting them. Things either ring true with you or they don’t.
To back up his intuition the Manager can often get information about someone from other people. Staff within the Bank are sometimes a good source of information for Managers. Every office has someone who seems to know everything about people in the locality! These people are a fountain of knowledge!
If you have skeletons in the cupboard, don’t assume they won’t come out! If they’re bad enough they are bound to surface and it can impact upon your chances of success.
What Was The Source of Introduction?
In preparing your Business Plan, or building your new business, you may decide you don’t want to present it to your own Bank for a variety of reasons
Having made the decision to refer your Plan elsewhere, you have 2 options: you can either turn up cold at the Bank of your choice, or you could ask a business colleague to introduce you to their Bank (assuming they are happy with the service they are getting).
If he knows you and the skills you possess, he may be prepared to do more than point you in the right direction; he may be happy to “vouch” for you. By doing this, he’s telling his Manager that, in his opinion, you have a good chance of success and that you are worthy of support.
If your introducer is a respected businessman and operates a good account at the Bank, then this type of introduction could be considered as a strength, a positive point in your favour.
You can see that in operating a small business you are a very important asset where the Bank is concerned. Make sure you capitalize on that when approaching the Bank for a loan.
Robert Warlow
Small Business Success
