Acing Your Interview for a Small Business Loan
It was the early part of December. The year was 2009. Ted was laid off a few months back and finding a job has been as difficult as ever. Ted was not one that lacked a good idea—but one that did lack, however, the time to dedicate to start his own business. Ted decides to spend more time towards starting his own small business.
Unemployment benefits certainly help but barely make ends meet. Ted needs to figure out how to get the money to start his small business. One funding option he starts exploring would allow him to start a “self-managed” 401k Plan. But his 401k plan is more like a broken 101k plan and starting a self managed 401k plan sounded rather complex. He decides borrowing money from a lender to be the best option for now.
What would make a lender give him money? What would the lender want answered to give him a small business loan and perhaps, a line of credit? While a lender asks several questions, the most important question is simple and basic: Are you going to pay me back the money you borrowed?
Lenders base their decision to make a small business loan of numbers starting with an examination of financial information on existing businesses or projected data on startups. An application for a small business loan is no different to an application for employment. Look at your lender as you would an employer and your loan officer as the person interviewing you for a job. It is very important you make a good impression and score high on your first interview with the lender.
Do your research and be well prepared for your first interview with your lender. The more information you have readily available for the lender, the better your chances for scoring high on your interview and getting your small business loan. Here are a few areas you must be well prepared in:
- Business Plan
- Financial Statements including an Operating Plan Forecast
- Business Tax Returns
- Accounts Receivable and Accounts Payable
- Schedule of Business Debt
- Personal Financial Statements
- Person Tax Returns
At times a lender may not be impressed with your business plan or your ability to answer his or her questions. If that should happen, do not view the lender as your adversary. Instead work with your lender. Remember, lenders are in the business of making money on what they lend you. They are looking at your loan request through the eyes of a lender and may have a point or two that you could help you with your business.
Raj Nisankarao, Rajrae Enterprises