Master the Steps to Getting a Bank Loan

If you own a small business and need a loan you already know the days of simply signing a loan document are long gone. Banks significantly increased the underwriting process, so here are some key steps to apply for a loan or renew your line of credit with a bank:Step 1 – Start early in the process. If you need to buy new equipment, don’t wait until the day you sign the purchase order to contact your banker about a loan. Let him or her know beforehand what you’re looking to purchase and the dollar amount. Likewise, if you’re renewing your line of credit, start the process a couple of months before renewal.By starting early, you avoid the rush at the last minute, which today is crucial. If the bank’s information is incomplete, its fall-back decision is to deny the loan or renewal. Starting early also allows you to contact other banks to keep your current banker competitive with terms and fees. More importantly, you need to have other banker relationships established in the event your current bank denies you a loan or calls your line of credit. Even if you have great credit and promptly pay your loan, your bank may not want to provide loans in your industry or geographic location.Step 2 – Gather the financial Information.Your banker will often request the latest financial statements. Depending on the terms of the loans, they can be internally prepared or need to be prepared by a CPA. If a CPA needs to prepare them, be sure to ask if the documents need to be compiled, reviewed or audited financial statements. Your CPA needs to know this requirement so he or she can perform the necessary procedures for each type of opinion.Get your corporate and personal income tax returns completed. The loan process will simply come to a halt without this information. When you deliver your tax information to your CPA at the beginning of the year, let him or her know that you need these returns by a specific date to give to your banker. If CPAs know early enough, they can usually accommodate your deadline. We suggest you ask your CPA to prepare a reconciliation between your financial statements and your corporate tax return. This information will assist the underwriting and speed up the process.The next thing is to run a credit report on yourself before the bank does.  By checking your credit beforehand, you can address any errors and also be prepared to answer any questions the banker may have about other debt you own.Step 3 – Prepare your story.We’re not talking about a fairy tale. Be prepared to explain your business and its goals to your banker. Bankers don’t evaluate only your credit, but also look at your character. They’re going to be more willing to loan you money if they’re confident of your business abilities.Step 4 – Be patient and responsive.The approval process can be long and nerve-wracking. Even if you provide all the information requested by your banker, he or she will ask follow up questions. Quickly respond to these inquiries.  Most importantly, keep your cool.Hopefully you will get your loan or line of credit renewed at terms you can live with and then use those funds to build your business.If you have questions about this topic, contact us at 904-396-5400 or Office@CPAsite.com. Now go get your money!