Business Loan Tips for Borrowers

Ready Set Yo, a new local yogurt shop in Largo, opened in August after owner Mia Corrales provided 20 percent down for a small business loan through USAmeriBank’s Belleair branch.

This is an example of how business lending is available locally. That said, here’s a few things we ask people to think about as you consider whether your company is ready to get financing from a bank or other financial institution.

1. A business plan counts. Ready Set Yo was prepared when requesting financing and brought an extensive business plan. For any company – especially a younger company - a solid business plan is important when getting a loan.

2. These days, borrowers are usually going to be asked to put up collateral. This doesn't necessarily have to be cash – it could be owner-occupied real estate, for instance. As for lines of credit, the bank can look at a wide variety of options, such as accounts receivable, equipment, or inventory.

3. A history of success is important. For most business loans, a bank will want to see three years' worth of a borrower’s financials.

Are there exceptions? Yes. For example, if an experienced professional starts a company in the same industry, and has significant collateral, that might be a case where a startup loan is possible. Ready Set Yo’s owners produced financials from the past five years to demonstrate a successful past in the restaurant business.

4. Having a deep, wide-ranging relationship with the bank can be helpful. With that in mind, see a banker to talk about your options, even if you don't feel ready yet to apply for a loan.

Lenders can help you on a number of fronts, such as exploring ways to have your personal and business financial planning work together, creating or refining a business plan, or connecting you with professionals that might help with everything from taxes to financial planning.

5. Think about worst-case scenarios. As you consider whether your company is ready to get financing, figure out what your sources for repayment will be.

In reviewing business plans, we find that this is often the biggest thing missing. It can be difficult to quantify your expected performance, but it’s worth the effort to research your industry, see how competitors are doing, and connect the dots between revenue and profitability.

6. Don’t take things personally. Remember that this is a new era for lenders. Asking for collateral and extensive documentation is a must, no matter whom an institution is lending to.

A successful relationship with a lender starts with strict confidentiality, but the relationship

should go far beyond that. Think of your lender as a resource and a trusted advisor. The right lending partner will take the time to understand your business.