When considering a loan request, what do banks look for?

The primary focus of the bank when reviewing a loan request is your ability to repay the loan. They will pull a copy of your business credit report, request your financial statements, and rely on other pertinent factors for clues as to your ability to successfully repay the loan.

  • Most lenders will expect for you to have already invested at least 25% to 50% of your own savings or personal equity into the business before considering the loan you are requesting. (No investor is willing to finance 100% of your business. They want you to also have “skin in the game”, meaning personal money or assets at risk.)
  • They want your work history, credit report and letters of recommendation to show a healthy record of stability, upward mobility and handling money responsibly. This will be very important to them in evaluating your credit worthiness.
  • Lenders will also want to know that you have the training and experience necessary to operate a successful business. There is a difference between knowing how to do the actual work your company offers, and running a successful business that does that work. Prospective lenders are looking for evidence of the latter.
  • Passion, while harder to quantify, is something else that lenders look for. Be sure your love of your business, dedication and enthusiasm are reflected appropriately in your loan proposal and business plan, as well as your knowledge of the market for your product or service.
  • Never is the cliché “cash is king” more applicable than when you’re applying for a loan. Lenders will evaluate your cash flow to make sure they feel it is sufficient to make adequate monthly payments on your prospective loan

Uselton, Clay & Bright, P.C. can assist you with preparing your financial statements in a format that meets the bank’s standards and needs.