Business Bank Loans

Business Bank Loans: A start up will not have any success in raising money through bank loans because the bank's criteria will not only require a security but also you must have a demonstrable ability to repay the loan. Due to the company being a start up it is nearly impossible to demonstrate a repayment track record. Though there are exemptions; these exemptions are rare.

Operating companies

if you are an operating company and you have assets that you can use as collateral as well as demonstrate the ability to repay the loan, you have a possibility of getting a bank loan. The best way to approach the bank is to create a mini business plan that outlines your operation, history, experience, earnings history and a clear plan of how you are going to use the money and repay the loan. One of the problems you want to avoid is to over collateralize the loan. Banks have a habit of trying to grab as much collateral as possible and this will create a problem later on should you need a greater credit line. If all your collateral is already committed to the first loan you will have nothing to offer to secure the next loan or a larger credit line increase. You will only be able to free up the collateral by repaying the loan. When negotiating with the bank just give them the collateral that is needed to cover the loan.

Applying for Banks Loans

The best way to apply for a bank loan is to first determine that the bank does not have any outstanding restrictions that will automatically result in a denial of your loan petition. So before submitting your actual loan application discuss with the loan officer the principles of your loan request and let him confirm to you that there are no parameters to your loan request that will result in an automatic denial. An example would be if you were offering to pledge stock, or you were looking to factor your receivables. If the bank does not accept restricted stock or does not accept account receivables as collateral your loan request will automatically be denied. Your best bet is to outline the parameters of your loan request and to approach banks that do loans within the parameters your seeking. You certainly don't want loan denials to be part of your credit record because it may prejudice other lenders decision. Also, make any loan application in the name of the business not your name. Banks will look to you and your credit record in reviewing the application but any action whether approved or denied should not be reflected in your personal credit record or report. In this economic environment, banks have become very selective in granting loans and credit to small companies. However if you present to them a reasonably good presentation you will have a decent shot at getting approval just remember you need to apply to banks that make your type of loan. One last mention about the business plan. It takes extra special effort to create the business plan. Remember, that the banking officer accepting the loan application will probably not be the person who is making the decision to approve or deny the loan. Though you may sit down and explain everything fully to the officer taking the application you cannot count on him to actually restate to the decision-maker everything that you have related to him. That is why the business plan is so important. You can make the plan a part of the loan application so that the decision-maker has all the facts directly from you to him. You can also provide contact information on the business plan that the decision-maker can use to contact you directly with any questions. Banks will require two identifiable sources of repayment. One will be the collateral and the second will be your cash flow. So make sure that you provide a cash flow projection that is reasonable and defensible. I would also recommend that you add whatever documentation that supports your plan. Examples would be copy of contracts or aged receivables list that shows your receivables turnover. Warning: the bank officer may or may not improperly disclose to outside parties information you deem very confidential. Do not assume that they will respect the confidentiality. If there is very sensitive information – request a signed confidentiality agreement. Generally, I recommend that you describe any confidential information generically and offer to provide the specifics if the loan is approved.

If you are deciding whether to proceed or even how to proceed raising capital for your business or a new start up; you will find that there is a great deal of free information on this website. If you have decided to take your project to the next level you may want to consider reviewing our audio seminars. These seminars not only provide much higher level of knowledge and information but on completion allow you structure a “game plan” of what needs to be done and how to do it.

Copyright 2011- Lance Shields-All Rights Reserved-About the author  >>>click here<<<