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Taking the Right Steps to Obtain Business Credit
Taking the Right Steps to Obtain Business Credit
By: Marc D. Pelletier, Vice President

Obtaining credit from a commercial bank, especially for the first time, may be a daunting experience for any entrepreneur. Here are tips to help you make the most of your next bank meeting.

People
All too often, entrepreneurs assume that the lender has an insatiable appetite only for numbers. First and foremost, lenders evaluate the quality and reputation of you and your management team. That means learning not only about the intricacies of your business, but taking the time to get to know you as an individual as well. By highlighting the experience of your team with resumes, references, organization charts, press, awards, and community leadership, you will give the lender a solid view of your team's personal and professional accomplishments.

Relationship
Forget the quick deal or transaction. Approach a banking institution with the intent to build a long-term relationship. Lenders strive to develop a solid partnership that will last for many years, rather than a one-time deal. One of your best resources down the road is a banking partner that understands your business inside and out, and that will support you through tumultuous business cycles. Use the initial meeting as an opportunity to learn about each other and your expectations for the future.

Advisors
Your professional advisors have a stake in the success of your business, and your lender should respect the expertise each brings to the table. Don't hesitate to bring one or more of your trusted advisors to the bank meeting. Your accountant, insurance agent, attorney, and lender must work together to ensure that you achieve your financial goals and objectives.

Customers
The lifeblood of your business is your customer. Your lender will want to know as much as you do about your clientele - including their purchasing habits and your plan of action in serving their needs. It helps to bring along to your bank meeting a sales pipeline, work-in-process schedule, or accounts receivable aging. If you sell your product to a large business, be sure to demonstrate your understanding of the sales and collection cycle. And, if you plan to expand into new markets, discuss your procedures for account screening and collection.

Money
Now you are ready for the million dollar question - how much money will you - and can you - borrow? Make sure you come to the meeting with an amount in mind, as well as a detailed account of how the funds will be used.

Business Plan
While lenders do not necessarily require a business plan for every financing request, it helps if you can demonstrate to a new financial institution that you are prepared for years of continuous planning and financial forecasting to sustain profitable operations. Make sure that your plan is written in an understandable and non-technical fashion, and be sure to include the following key elements:

Business Financial Information
One of the most common oversights is being inadequately prepared with financial information. Lenders review a comprehensive picture of your business fundamentals, with a bias towards the balance sheet and cash flow statements. Here is the basic financial information you need to prepare and bring to the meeting:

Personal Financial Information
The personal financial statement is a critical tool in the underwriting process. It shows the lender what your spending habits are relative to your income, and provides a breakdown of your personal net worth. The personal financial statement can be quickly produced from readily available financial software or an industry financial statement provided by the banking institution.

Understanding the steps that are required to obtain credit can help you properly prepare for the meeting with your selected financial institution. The more information you provide up-front, the easier it will be for your lender to assess your situation and help you secure the future of your business with the right financing tools.

Updated: January 1, 2013

This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.
© 2013 Wilmington Trust Corporation.

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