Banking Basics

Banks want to make loans as this is how they make money. It is important to be confident and well prepared when you meet with the Banker, so include the following information in your loan request:

• The amount of the loan you need.
• How long you will need to pay it back (the shorter the better).
• What you will do with the loan and how it will make your business more profitable.
• Collateral to support the loan.
• Personal guaranties to support the loan.

Prepare for the Meeting

It is essential that you are well prepared for the meeting no matter how strong you believe your business is. The following should be prepared for the meeting:

• An executive summary that details the background and operations of the business.
• Details on the loan request, what it will be used for, how it will increase the company‚Äôs profitability and how it will be repaid.
• Detail on the collateral that will secure the loan. Very few lenders will lend money without adequate collateral to support the loan.
• Three years of financial statements and tax returns for the company along with a personal financial statement for the owners. Understand the financial statements and be prepared to answer questions.
• A three to five year financial projection for the business. Be realistic. It is much better to be conservative on your projections and to over deliver.

After the Meeting

Ask the Banker when you can expect an answer but be patient. Do not get discouraged if the loan is declined. Use it as a learning tool. Did the loan request make sense? What could you have done better? If you are still confident that the loan request is a good business decision, keep trying other lenders. If it is truly a good business decision, you will find a Bank to approve your loan.

Mark Rothschild has been in the banking industry for over 25 years. After getting his B.A. from the University of Michigan, he earned his M.B.A. at the University of Texas, and then his CPA. He is currently Senior Vice President, Commercial Bank, of JPMorgan Chase Bank, where he has worked for twenty-three years.