Happy National Mom and Pop Business Owners Day to our fellow small business owners! In honor of this special day, we would like to share an article that was recently published by the American Bankers Association. The article, titled ‘Five Tips to Increase Your Chances of Getting a Small Business Bank Loan’, provides valuable banking tips intended to help small business owners develop a mutually beneficial relationship with a bank, obtain loans and evaluate offers:
1) Get to know bankers at several financial institutions in your community.
Prior to requesting a loan, find out which financial institutions in your market make loans to firms similar to yours (due to the fact that not all banks specialize in business loans). Banks may make loans based on industry, while others may only lend to those in certain stages of the business life cycle (no startups, for example). It is important to work with bankers who understand your industry and find out how the current financial crisis has affected credit availability in your community.
Another reason to deal with banks experienced in your industry is that they can offer you financial advice. If these bankers work with firms facing the same industry-related problems as you, they may be able to provide helpful advice and financial products tailored to your firm’s needs. Seek a banker who can give financial advice that will help you survive and thrive in today’s economy.
2) Be able to articulate your firm’s “value proposition” to its target markets and your business plan to reach them.
To increase your chances of getting a loan, articulate why other companies or customers should do business with you and how you’ll effectively compete in your chosen target market segments. To help ‘sell’ your company, develop a business plan that has three different scenarios: best case, most likely case, and worst case. You want the banker to understand all three since you’re asking for support through good times and bad.