| When do you know you're ready for a bank loan? After you worked thru the sales and marketing campaign numbers for the year? When you're in desperate need of money? If your answer was yes to either question, you're correct. The proverbial however is, today's attitude is to absolutely mitigate risk on any type of loan. In retrospect, having gone through the dot-com era of raising capital for a start up, I found myself in fantasy land. In today's credit environment, your business must be bankable, personal financials squeaky clean, sterling credit history and high score. So are you ready or not? Credit Worthiness. A low credit score will haunt you terribly when you're looking for money. A snap judgment to loan or decline is made based on your credit history. Rightly or wrongly, this history is truly a profiler. Ask your banker what is an acceptable credit score. Business Acumen. Have you been honing your business skills? And can you demonstrate your business success. Being in business for years show you can handle the ups and downs of your business. An advisory board will shores up the business knowledge base. Sweet Spot. Does your business service or product have sex appeal? Selling pencils and paper is not same as selling pen tablets and of course the margins are markedly different. You cannot sell everything to everyone. A good profit margin along with cash is king. The Numbers. How grounded are the numbers and are they achievable? Can you show that previous forecast scenarios produced results? If you're not a numbers person, you'll need to examine your options and work with such a person. Collateral. Besides offering up your family, what can a lender take away in value to cover their losses, if it comes to that? Said another way, will your family give up their home to a lender because you default on the loan? Default Tolerant. If your life savings and home equity are anemic, and your pulling too much money from the business to live a lavish life style to keep up with the Jones, you are not default tolerant. More Money. If sales and profit are on the rise, how much more money will you need to continue the business growth? Accept that you'll always need money to grow a business, and even it you remain steady and stable, you'll need to supplement (line of credit) the cash flow needs. You'll always need money while operating a business. When to get it (timing), how much to get (size amount) and what's the lending source (traditional vs. private) will be your nemesis as long as you're in business. This is reality. |
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