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7 tips to help your loan application stand out

Getting your business loan application to stand out and gain approval doesn’t need to be challenging – especially if you approach the task from a lender’s perspective.

Think to yourself: If I were a bank loan officer, what are the things I would most want to know about this business? Here are seven tips to get you started:

1. Demonstrate your repayment ability – For lenders, the most critical bottom-line question is: Can this business ultimately repay this loan on time? Any hiccups in an answer to this question can temporarily or permanently knock your loan application out of consideration.

Your lender will ultimately assess the creditworthiness of your business. Items that might derail your application include: a low business credit score due to slow or past-due credit payments (a higher credit score is always better); insufficient owner’s equity; poor earnings; questionable management and/or accounting; or low-quality collateral.

2. Present a clear and strong business plan – It’s not the lender’s job to figure out your business plan; that’s your task, by being crystal-clear about your product/service offering. A single read of your business plan should immediately reveal what your business does, how it makes money and how revenue will be used to grow your business AND repay your loan.

If you’re in a highly competitive business, such as the restaurant industry, you’ll want to be sure to note in your plan how your business is unique or stands out from the competition. This differentiation could be based on your food quality, value, ambience, dining experience or even location.

3. Focus, focus, focus – If your business is new, it can be temptingly easy to become a jack-of-all-trades but master of none. Don’t. Instead, identify the specific market niche your business serves (particularly areas underserved or ignored by your competitors) and focus your attention and resources on mastering that specific piece of business before seeking other opportunities. Lenders value knowing the exact part of the market you serve.

4. Show positive cash flow – Hope is not a plan, and weak cash flow is not a recipe for loan approval. Be prepared to show current, well-documented financial statements that clearly show your positive cash flow history – the better to give your lender a good idea of how you plan to repay your loan.

5. Demonstrate strength of character – Your personal and professional reputation matter. While “character” may not be explicitly requested on a loan application, your ethical and moral standing speaks volumes to lenders. As much as possible, your professional and character references should attest not only to your business knowledge and experience, but also to your reputation.

6. Think local – There’s a good reason why most business lenders prefer to lend to local businesses: They know these businesses best and can regularly check in on their progress. When determining the most appropriate lender for your financial needs, consider the fact that your local lender likely specializes in certain types of loans for businesses in your area much like yours.

7. Think trusted – While you’re not required to have a relationship with just a single bank, developing a relationship primarily with one financial institution allows both you and your lender to get to know each other better and establish a greater level of trust, as well as potentially simplifies loan administration and could make the deciding difference on a close-call loan.

As a local, trusted commercial bank based here in California, California Bank & Trust is prepared to help your business succeed. Let us know how we can help your business pursue and gain the full credit it deserves.

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The information contained herein may not represent the views and opinions of California Bank & Trust, a division of ZB, N.A. or its affiliates. It is presented for general informational purposes only and does not constitute tax, legal or business advice.
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