Applying for a new business loan need not be a unpleasant experience. By eliminating your limiting beliefs and preparing for the meeting in advance you have every reason to feel confident.

Remember, that the bank wants to lend money, they really do. They are in the business of making new business loans. In fact banks love to make new business loans because businesses are very good customers and make a lot of money for them.

Supporting Documents Needed for a New Commercial Business Loan

Your bank will expect to see a complete business plan plus:

• financial projections including income statement, balance sheet, cash flow projections, your resume or bio.
• personal net worth statement (include a separate list of assets and liabilities if there are a lot of items).
• copy of your personal identification and social insurance number.
• copy of either your certificate of incorporation or DBA (doing business as trade-name) registration.
• list of personal bank accounts and credit references.
• list of company bank accounts and credit references (if any).

If you are applying for a new business loan for a business you have been operating, they will also want to see:

• complete set of company financial statements for past years (bring the last three years if you have them).
• current year to date financial statements.
• any financial statements should also include a copy of your accounts payables and receivables.

The Loan Application Process for a Commercial Business Loan

Expect that most loan officers will want to get to know you and more about your business before getting down to details.

They will most likely ask you about your business, what the money will be used for and if they do not know anything about your business will ask if this is a new business or an established, on-going entity.

Getting into the Details

Depending on your loan officers level of experience he/she may begin to go through the business plan with you sitting right there. Be prepared to answer questions and perhaps make clarifications.

The Executive Summary of your business plan should include how much money your are looking for, projected revenues, profits and the type of loan you are looking for.

If the loan officer is inexperienced or new to business loans she may ask for some time to look over the business plan. This is not unusual. I might ask some questions about how long it would be until you could meet again and ask her to clarify the loan decision process and the parties involved.

Be patient and work with the bank as a good relationship is very important and it is important to get off on the right foot. If you need a quick decision tell them that upfront and your reasons. Just because you are anxious and want to know right away is not a good enough reason. Because if you push too hard they will be wondering why you need to move so quickly and what might be missing or what you may not have disclosed.

Patience is a virtue, feel free to ask good questions, keep it professional.

Truth is you cannot convince any investor, bank or VC to provide financing for any business that is not viable or ill conceived. After all the strength of the bank lies in the wisdom of its investments, and it is their responsibility to their depositors to ensure that the money is put into good enough projects that they can expect some level of return (or at least, assurance that it will not be lost). Banks are in fact some of the most conservative investors you can find, and you will need to make very impressive, very convincing presentation to get them to back your business. Here are some pointers.

Format: At the early stage some VC’s will prefer to see a PowerPoint presentation. Some are accepting proposals via a audio file and if interested they will get back to you.

Connect the dots: Make sure you clearly state in the beginning WHO the customers are, WHAT problem is being solved, and HOW the company’s product/service accomplishes it.

Meeting: If you are meeting with them face-to-face do not let empty air dominate the conversation. Make sure you control the timing and pace of the meeting.

Research the VC: do some research in advance. Find out who you will be meeting with and make sure they invest in your type of companies

Follow up: Do not be timid about following up with them.

Push for a Decision: They will want some time to think about your proposal and you will not get an immediate decision.

Be Real: Do not pretend to be something you aren’t. Be real, be you, be authentic.

Final Thoughts

You must have confidence in your business idea and have a well thought out business model and plan. If you focus on innovation and the viability of your business model, serious investors will want to take a good look at it.

Every major decision — to invest or buy involves getting the other party to buy into your idea. To get that strong emotional buy in - you must first get their attention. This involves spending a significant amount of time preparing and thinking through what makes your business idea special, unique and viable.

If you cannot explain it clearly — how in the world can you expect someone else to understand it?! How can you expect them to invest in your idea if they do not understand it?!

Spend your time working on your pitch to get their attention. NOTE: be careful not to over inflate your business concept and viability. You must also have a good business plan that supports the statements you made trying to get their attention. Remember: a presentation that cannot stand under scrutiny will fail to get investment dollars.

After you get their attention — you have to be able to get them to understand the business idea and prove its viability. This will require a well written business plan to close the deal.

Another thing — you will need a good list of potential Investors or Venture Capital companies to pitch your idea to. Make sure you have enough good prospects so that you do not run out of prospects before you refine your business plan and presentation.

Keep smiling! If you have a viable idea, you will find money. It is just a matter of time and your ability to learn, shift and adjust.

In the downsizing era a franchise became a popular choice for people who were getting laid off or taking early retirement. Now people who are disillusioned with their jobs are quitting to reduce the stress or do something different. They want to be their own boss and a franchise is still a popular choice but financing has become more difficult.

As franchising has matured so too have the different offerings and franchise opportunities. Many of the new franchise concepts do not yet have a successful track record of placing people in new units. This makes it difficult for a would be franchise operator to obtain financing because there is not much difference in the risk between a start up and some franchises and the banks know it. So what is a business person to do to get financing?

Make An Equity Play

In cases like these it is best to seek financing through offering investors equity. This can be accomplished by getting a manager or a partner with direct experience to invest in the operation. Sure you give up a portion of equity and future profits but unless you are willing to pledge personal assets and a personal guarantee you will not get he financing you need.

Trends indicate that prospective franchise owners are looking for investments less than 250,000. They all want something that is easy to run and less than 10 employees. This makes sense to me because they are buying a franchise to simplify life and get away from the high stress business environment they just away from.

Check Out The Franchise First

When doing your research in selecting your franchise there is one simple thing you can do to make sure that you get the financing you need. Make sure that the franchisor is listed in the Small Business Administration Registry. Not all are. To be on the list a franchisor has to submit a Uniform Franchise Offering Circular and pay a fee to the SBA. The SBA then conducts a complete review to make sure that they adhere to the SBA standard operating procedures, one of the important steps to approval. Without the SBA approval even if you are a strong borrower the SBA will deny the loan guarantee. This means the bank has to assume all the risk or else get you assume more risk by bringing in a partner who is solid financially. That way if things go south they have two owners invested in making the business a success.

Can Your Franchisor Help With Financing?

If your franchisor has been around for awhile they should be able to help you obtain financing. In some cases they may have an exclusive relationship with a specific bank. This speeds the process and reduces fees because the franchisor pays those costs.

At a minimum they should be able to suggest lenders who know their system, track record and understand the business. One way of getting to this information is to ask the franchisor if they have any former bankers as franchisees or owners? If so, ask to be referred to them. When you call query them for specific information that they felt was important for their bank to know. If they were former employees they likely provided the bank with a thorough explanation of how the franchise system works and explained the concept to them. That way when you walk in, they are familiar with the concept and can use the past performance of other franchisees to assess the risk.

Industry Experience May Be A Requirement

Some franchisors have added additional restrictions such as requiring specific industry experience to qualify to open a franchise. In my experience franchisors prefer people who have general business and management experience.

Get Franchisor To Finance The Real Estate

One of the trends we can expect to see more of as interest rates rise is the use of sale/leasebacks. The franchisor literally buys the property then leases it back to the operator. This can be an important strategy for a franchisor because they can put the excess equity to work building new units