What’s the #1 way to improve your chances of getting your business loan
Prepare an Executive Summary
- The #1 way to improve your chances of getting a business loan approved is to prepare a short executive summary and attach financial statements. I am always amazed at the number of small business owners that only create financial statements at the end of the tax year to include with their annual tax filing. How do you know how well your company is performing? How can you communicate that to a lender?
Be Very Brief
- The operative word for the executive summary is “brief”. 2-3 pages maximum, not including the financial statements. The executive summary simply includes a succinct overview of the business, your products and services, management team, goals, strategy for growth, and your sources and uses of funds. Your executive summary helps the lender determine how healthy your business is now, how likely it will stay the same or grow even stronger, and whether or not you are a likely long term customer. All of this can impact a loan decision.
Financial Statements for Inclusion
In an optimal world, you would include the following three financial statements: balance sheet, income statement, and cash flow statement. The balance sheet shows what your company owns and owes, the income statement shows your company’s profitability, and the cash flow statement shows how much cash your company generates. A lender generally focuses on operational cash flow because this is the cash that typically pays back the loan. Some lenders will focus on collateral (assets) that they can liquidate to repay the loan. Nothing like seeing good, positive cash flow or a high amount of unencumbered assets to convince a lender you’re a good credit risk!
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