Thinking About a Business Loan? Here’s What your Banker Needs

Bankers typically go by the 5 C’s of lending: Capital, Character, Capacity, Conditions, and Collateral. When you apply for a business loan, your request must meet certain basic requirements.

Your banker needs to have:

  • A written request for a specific amount of money.
  • A detailed explanation of the use of the funds.
  • A projection of how and when you will repay the loan.
  • A list of the collateral you are offering as security for the loan.

In addition to these essentials, the banker will want to know what will happen in the event of your disability or death; that is, do you carry disability, life, and general liability insurance?

The banker also wants to know:

  • The financial history of your company in the form of company balance sheets and profit and loss statements for at least the past three years.
  • A realistic projection of profits and a twelve-month (month-by-month) cash flow projection. This spreadsheet should show the specific month that cash will be received from various sources and the month that specific disbursements need to be made.
  • A narrative relating your personal business experience.
  • The company “game plan” telling where the company will be several years hence in terms of size, types of products or services, number of employees, locations, etc., to give the banker some insight into your long-range planning.
  • Personal tax returns for each major owner of the business for the past three years.

Put yourself in the banker’s shoes and see what questions you would want answered if someone asked you to risk your capital.

Turn to your Accountant and Advisor

If you have not previously assembled a loan request in this manner, engage professional assistance.


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