How Do the Banks View Your Business?
Getting a small business loan is no longer a process of heading down to your local bank to meet with your banker, engage in a bit of small talk, and then begin a detailed review of your business, projections and financials.
The industry has changed. In the past, each bank had a knowledgeable lender who would thoroughly analyze small businesses. Now, almost any bank employee can simply enter some basic information about your business and immediately disqualify you from getting a loan – without ever really having a look at your business.
What Do They Look At?
One of the first (and most important) things a bank will look at when judging your business is your personal credit score. A business may be profitable and perfectly healthy, but if the business owner does not have a great credit score, the owner won’t be able to get a loan. This reliance on the personal credit score is a huge problem with the industry, and it is no wonder so many small business owners are frustrated with the current banking system.
In addition to the personal credit score, banks will also check your business credit score. And if you also pass that hurdle, they will begin to look at your business financials, projections and business plan.
Learn To Think Like a Lender
Because so many entrepreneurs spend countless hours preparing and applying for a loan only to be turned down immediately, it is important that business owners understand how they are viewed in the eyes of a lender – whether they need a loan today, or may need one in a year. Thanks to recent advances in technology, this task is getting easier.
The industry is beginning to evolve, and some forward-looking lenders are realizing that small business owners are their partners in the lending business. Neither side has the chance to benefit when loans are turned down. Knowing that a healthy small business is a healthy borrower, these lenders have developed interactive tools to help business owners. These tools:
show you how banks view your business
provide insights into how to improve your profile
show you your lending options based on your business data
These new interactive tools can give an owner insight into what a lender is thinking, and what the lending options might be. Armed with this knowledge, a business owner can tailor a proposal and improve the chances of getting a loan or finding the right type of loan.
Lenders are demanding when it comes to business owners. If rejection is the only service provided by a particular institution, you may need to find another that will work with you to improve your profile and get the capital you need.
Gordon Brott is Director of Marketing for On Deck Capital, which has developed small business lending tools and has provided over $80 million in loans to thousands of Main Street businesses across the country since 2006.
-By Gordon Brott of On Deck Capital
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