This month Quality Accounting Solutions Business Blog has been focusing on business start-up issues, especially organization and planning. Our blog post today will wrap-up our advice on writing and utilizing your business plan and supplemental marketing plan. Today’s topic addresses a key component of your business strategy – MONEY, specifically funding requests for starting or growing your business.
We called in our friend Robert Pickerell, VP & Regional Business Development Officer of Centrue Bank in Fairview Heights, Illinois to give you an insider’s look at exactly what your banker wants to see when you ask for money to fund your business.
HAVE A PLAN
As a banker, I cannot stress enough how important it is for any business owner to have a strategic business plan. Whether they are a new company or looking to expand, having a plan is essential to gathering the right people to help achieve those goals. All too often customers and prospects ask for loans and lines of credit, but they do not have specific details to support how this money will help them achieve their business goals. Lenders cannot present the loan request to underwriting without accurate details and logical information; the borrower’s vision must be presented as a clear business plan.
USE YOUR RESOURCES
Once you have a plan in place, meet with your bank to review the business plan and discuss how it can be financially implemented. Most bankers are underutilized by the majority of their customers. Unfortunately in many cases, when a business owner finally asks for help, it is too late for the bank to get involved. Their cash flow is low, assets are limited and A/R is running behind.
Bankers work with a variety of customers in similar industries on a daily basis. Using information learned from one business to help another is regular practice. It is in every business owner’s best interest to develop a good relationship with a banker they trust. Ask the banker to review the business financials quarterly or in the very least semiannually.
Bankers will watch for economic trends, possible concerns and make recommendations accordingly. This is not a foolproof option, but it does give the business owner another level of accountability to meet the goals of their business plan. Nothing makes me happier than to see my customers succeed and grow!
BUILD A RELATIONSHIP
Banks are generally looking to build long term customer relationships. Like you we want to work with people we know and trust. Anyone looking to borrow money should expect to at least move part of their banking relationship to the lending bank: this may include the company operating account, treasury management, or even credit card processing. It is not necessary but it is preferred that a deposit relationship be established prior to a loan request being initiated. It is viewed as a gesture of good faith by the bank.
Smaller banks like mine are typically able to be more flexible with lending guidelines, since we can take a more personal approach to the entire business and borrower’s relationship with the bank. This is a benefit of working with a smaller bank rather than a large regional bank. Avoid being just a number in the computer, start your application process in-person with a bank you know and trust.
IT’S ALL IN THE DETAILS
Remember: When asking for a loan or line of credit from a bank details and organization are of the utmost importance. The ideal loan candidate has been operating a business for at least three years, and the guarantor has a credit score of 720 or higher. If you want us to care about your business, show the bank how important your business is to you. Are your books up to date? Do you have a marketing plan? Have you attained any of your previous business goals? How exactly can we help you reach your current business goals? If you are obviously invested in your business, it makes our job much easier.