Meeting Your Lender About a Business Loan? 5 Ways to Be Prepared

Community events have always been one of my favorite parts of living in Utah. From concerts in the park and farmers markets to rodeos, art strolls and county fairs, I enjoy getting out, meeting new people and feeling connected to the places we call home. It’s one of the reasons I became a community banker and commercial loan officer. My career has given me the opportunity to build relationships with many of my neighbors, and I’ve appreciated the conversations we’ve shared over the years.

Communicating and sharing ideas is important in every relationship, whether it’s with your neighbor or your neighborhood banker. What I’ve noticed as a lender is that new clients often feel anxious when first meeting with me. That’s perfectly normal. Approaching a banker to ask for a business loan can feel daunting.

If you’re a business owner seeking a loan and feel nervous about meeting with your loan officer, I have five tips to help you prepare, feel more comfortable and improve your chances of securing a loan.

5 Tips to Prepare for a Meeting with Your Loan Officer

1. Be Ready to Share Your Business’s Story

A go-to conversation starter for many loan officers, me included, is:

“Tell me about your business.”

It’s important for two reasons. First, it helps clients feel more comfortable because they can start by talking about something they care deeply about. Second, it gives loan officers an impression of the business beyond what’s included in a loan application.

When sharing your story, include why you started the business, your experience, your mission and what sets your business apart. While not technically required, this information helps lenders get to know you and your business better, which can help them recommend the right loan.

Also, be sure to let your passion and commitment show. This demonstrates to lenders just how hard you’ll be willing to work to make your business succeed.

2. Bring Your Business Plan

As lenders, our job is to evaluate your business so we can be confident in the request. Remember, banks use their depositors’ money to fund loans. That’s why we are careful when choosing companies and individuals to finance. We have to make sure it’s a good risk and that there is a clear plan for repayment.

Your business plan should include different information than what you share in the “Tell me about your business” conversation. It provides an organized, well-thought-out explanation of your business objectives, goals and strategy for growth.

This document also demonstrates that you, too, are careful and detail-oriented. Being able to discuss your products or services, your industry and your plans to build success will help you stand out among applicants.

The U.S. Small Business Administration (SBA) is a tremendous resource if you need help writing a business plan. You can research what to include and download sample plans at sba.gov.

3. Supply the Right Business and Financial Documents

While your business plan, and your enthusiasm for it, is important, it alone won’t qualify you for a business loan. We’ll also want to review your business and financial documents.

You should be prepared to provide:

• Three years of business tax returns or prepared statements from an accountant
• Balance sheets, income statements and cash flow statements to show your financial results over time
• Legally binding business documents, such as licenses or articles of incorporation
• Personal financial documents, such as federal and state tax returns, that prove your income
• Two full years of projections if you have not been in business three full years or if you’re planning to expand your business

4. Make Sure Your Personal Credit Reflects Positively on You

You might be asking why your personal credit history would be a factor for a business loan and not just your business credit history. There are a number of reasons.

Your personal credit score is one of the clearest indicators of your overall financial health. Because it can show how likely you are to repay debt on time, it may affect:

• Loan approval
• Loan amount
• Interest rate
• Repayment terms

Lenders may also look at your personal credit history if you’re a small business owner who has used personal funds, a personal credit card or a personal loan to support your business. If your business is relatively new, you may not have developed a comprehensive business credit history yet, so your personal credit can help lenders assess the request.

The exact credit requirements differ by lending organization and loan type, but you should have an idea of what your personal credit looks like so you can better discuss how it may influence your loan. You can request your free personal credit report at www.annualcreditreport.com.

5. List Your Collateral or Show Proof of a Secondary Source of Cash Flow

Remember earlier when I said lenders need to be confident that your business is a good risk? Collateral provides an additional security measure. By pledging an asset when you take out a loan, lenders have a way of recovering funds should your business not be able to repay the debt as promised.

Depending on your business and personal financial circumstances, collateral can include:

• Accounts receivable
• Cash and deposits
• Business equipment
• Inventory
• Real estate holdings

If you don’t have, or don’t want to pledge, collateral, another strategy may be to show proof of a secondary source of cash flow, such as a co-borrower or guarantor.

Final Thoughts

Meeting with a lender to discuss a business loan often makes clients feel some measure of anxiety. Please know we are here to help you achieve your goals. Arriving with information to support your ideas and requests can also put you at ease. Remember, it’s a conversation, and we’re excited for you to tell us about your business.

If you have questions about business loans or the process, please reach out to one of our loan officers or explore our commercial lending resources here.