How to Approach a Bank for a Loan

Banks aren’t monolithic obscure vaults filled with gold bars and dollars bills intent on keeping you out. They want, and need, to put their money to work. So if you want a bank to invest in you, invest in them before you step one foot in the door.

Win an Advocate

My banking colleagues recommend you come to the bank when the loan is the last thing you need. This is good advice. The loan agent is your advocate. Your first job is to get their buy-in, convince them to go to bat for you. The best way to do this is to be well prepared.

Be Prepared

If you have an existing business make sure your financials are up-to-date as of the last full month. Complete any overdue accounting clean-up before you submit your financial information. Run a UCC filing search for your business to make sure there aren’t any out-of-date or preliminary liens on your assets. If there are, remove them. Creditors are supposed to remove these filings when the debt is satisfied or a financing is not consummated, some don’t.

Run your credit report and know your score, 700 or higher is best. Be aware of any blemishes in advance. This conveys transparency, and if you are risky for them, be willing to do the work to clean it up. Banks know how to improve credit scores, ask them for advice if your score falls too low, then go do it.

If you are a new business, have a comprehensive business plan ready and complete all your business formation steps, legal and governmental. Bring that paperwork with you. Even if the banker is blown away by your business plan, the bank simply cannot open an account, let alone process a loan, without business formation documentation.

Expect to fill out an application, ask for that first so you can fill it out in advance. If the application request more data, gather it all at once and submit a complete application at one time. All banks have different requirements, but below is a good guideline for what to expect to provide:

• 3 Months Business Bank Statements

• Personal Financial Statement

• 2 Years Personal & Business Federal Tax Returns

• Interim P&L and Balance Sheet

• Debt Schedule

• AR & AP with Aging

Be Responsive

Banks are heavily regulated, as such, they require a lot of supporting documentation. If additional information is requested, do it quickly. This shows you’re responsive and serious, setting you apart from the other applicants. Once your banker has had a chance to review, listen to their advice. If they steer you towards a product you hadn’t considered, be open. You’re more likely to secure the alternative loan. Last, be prepared for the bank to ask for a personal guarantee or other form of collateral even if your business assets are sufficient to cover the loan. It’s good to assess how much personal risk you’re willing to take before the process starts.

Easy Does It

Although some of this seems like common sense, it rarely plays out like this for the banker. Keep in mind, he or she has to navigate the bank’s bureaucracy as well, so the easier you make it for them, i.e., the easier you are to work with, the more likely they will advocate for you and convince the bank you are a good bet even if you aren’t stellar on paper.

At Rolando Locci Consultants, we are experts at representing clients to banks. We set our clients apart from other applicants increasing their chances of securing financing and establishing a long-term banking partnership. Take the first step towards building a relationship with us by scheduling an introductory meeting.

Special thanks to Josh Hamilton at Community West Bank for his contributions to this article.