Getting Your Idea Ready for the Bank
You have a business or want to start one. You know the bank is your next stop, but you’re concerned you might not be ready. What do you do?
Get started now, before your first meeting. The key is to ask yourself every question you can think of, prepare the answers and gather any documents you need. The more prepared you are, the better your banking experience will be. It can cut down review and decision time and starts your new banking relationship on the right foot.
Start with these questions.
What do you want to do?
Your business plan is the most important document you have. Review and revise it, zeroing in on exactly what your short and long-term goals are. Are you just starting out? Growing? Do you want to invest in new products or locations? Change up your payment systems? Hire more staff? Be crystal clear about your goals so you can identify exactly what you’ll need to reach them.
What do you have?
Many business owners think they have a good handle on their entire financial picture, but they often neglect key areas. When pulling your financial house together, don’t forget about the personal side. Your household accounts, credit cards, loans, etc. are just as important as those for your business. When you’re an entrepreneur, you are your business, and your finances matter.
Take a full accounting of everything you have. Fill out a personal financial statement (your financial advisor can give you one and assist with completing it if you don’t know how), gather your account statements—both business and personal, profit and loss statements, balance sheets and two years of personal and business tax returns. These are all critical for lending decisions. If you don’t have some of these, talk with your CPA about getting them. If you don’t have a CPA, get one. That can be a red flag for a bank.
It’s vital to be totally transparent. Share everything because it will all come to light eventually. Better to discuss it all up front and find solutions in structuring a deal than to hand your financial advisor a surprise late in the process that can blow it all up.
What do you need?
What will get you to your business goals? Is it lending, deposit accounts or both? Do you need to buy real estate or equipment? A payroll solution? Payment system? This is something your financial advisor can help you figure out, including exactly how much you might need to borrow. Asking for $100,000 line of credit may sound sexy, but not everyone’s finances can support it. Your banker will help you find the right balance between what you need and what you can get, and then structure a deal to get it done.
What might stand in your way?
The first thing to examine is your credit history. As the business owner, your personal credit is pulled for a number of the financial services you need for your business, including loans and even merchant services for accepting payments. If you have a spotty credit record, talk with your financial advisor about ways to repair it.
Next talk about collateral. Cash is king, and a cash secured loan is a great way to start out and establish a payment history. It can allow you to increase your loan over time as you make regular and timely payments. You can also look at securities and real estate, including your personal home and other goods. If collateral is an issue, you still have options. Many banks develop lending products for less advantaged small businesses that are smaller and don’t require the same levels of collateral—or even any collateral at all. It may not be a big loan, but it could be a first step to something greater.
If you can answer these questions fully and with documentation in hand, your first meeting at the new bank should go smoothly. Remember always that banking is a collaborative process, and your financial advisor should be your friend. Be transparent, work together, keep the lines of communication open and always know that your banker has your best interests at heart. If you ever doubt that, you may have chosen the wrong banking partner.
Nicole Dunigan is a financial advisor at Pinnacle Financial Partners. She can be reached by phone at 615-743-6037 or by email at Nicole.Dunigan@pnfp.com.
