By Jess Adams
      As a small business owner seeking a loan, you may have discovered that finding a bank willing to loan money can be more difficult than you originally thought. Banks may see loans to start-up businesses, or businesses that are just two or three years old, as too risky.
      However, there are steps you can take before meeting with a lender that will help you prepare and clarify your borrowing needs, ultimately helping you secure a loan for your business. Be prepared to provide answers to the following questions before you meet with your banker:

• How much money do you need?
• How are you going to use the money?
• What will be used as collateral for the loan?
• How will the loan be repaid?
• How quickly will the loan be repaid?
• How will you repay the loan if your original repayment plan fails?

Develop a Proposal
      Once you have answers to these questions, develop a loan proposal to present to prospective lenders. It  should include information on who you are and what your business is, how much money you need and how you plan to repay the loan. Use documented historical information, such as tax returns or previous financial statements, to support your financial calculations—including projections for revenue growth and expense calculations.
      Your proposal should also provide an overview of your company, including a description of the business, its history and current activities, as well as short-term and long-term goals. Reference letters from vendors and customers also can be helpful.
      
Have Financial Records Ready
      Your historical financial records or forward-looking statements should include a balance sheet, an income statement and a cash-flow statement. These financial statements should be as detailed as possible and include supporting documentation, such as inventory lists, accounts payable and accounts receivable aging reports. If possible, provide three to five years of historical statements and one to three years of projections. Most lenders also will want to review your personal financial statements. These statements should detail your assets and any corresponding liabilities to fully illustrate your financial position.
      Last, provide brief résumés for yourself and your key personnel that include a summary of work experience, qualifications and credentials.
      Providing all of this information will give your banker a snapshot of your business and will assist in establishing the ideal loan structure. The more they know about your unique needs, the better they will be able to meet those needs.
      
The Relationship After the Loan
      After you have selected a bank and received your loan, it is important to maintain a trusting relationship with your lender. This will enable your bank to react quickly should your situation change, or if changes need to be made to your loan structure. You should:

• Always be honest and upfront with your lender about your business finances throughout the relationship.
• Keep your financial statements current and share them with your banker on a regular basis.
• Inform your lender of any problems or adversities that could hinder your ability to repay your loan.
• Your lender can be a source of sound advice and counsel. Consult with him or her when considering a change in your business or a significant purchase. Inform your lender of significant business decisions before you act on them.

      The old adage, “Those who fail to prepare, prepare to fail,” holds true in a borrower/lender relationship. It is essential that you are fully prepared when seeking a lender. By being prepared up-front, your lender will be better able to assist you with your loan needs.

Jess Adams is loan officer for small business at Union Bank’s Gregory branch in Kansas City. You can reach him at (816) 767-5842 or at Union Bank is a full-service, locally owned community bank with 11 branches in the metropolitan area.