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There are a lot of reasons why you may need a business financing loan. It could be for starting up the business itself, or for business financing for the expansion of your business after the success of the first stage.

While a lot of business owners are afraid to go to banks for loans, it’s actually a lot easier than people think. All it really needs is a lot of preparation, planning and a good old can-do attitude.

There are three main things that you need to prepare so that you can convince the bank that loaning you the money is not going to be detrimental to them:

Having a good and clear-cut business plan is essential to acquiring a business financing loan. When the bank sees that you have a long-term plan for your business, they will feel better about lending you a large sum of money.

This business plan should include a detailed outline of how much you are going to use for which part of your business start-up or expansion.

Cash Flow Projection

Of course, the most pressing concern that banks have about giving out a business loan is the person’s ability to pay them back. Having a cash flow projection as a part of your presentation to the bank is a way of showing them that you are also thinking of how the bank will fair out in this investment that they are doing in giving you a business financing loan.

Include in this cash flow projection your short-term and long-term projections, and realistic annual, bi-annual and quarterly projections of your income and expenses. The better the cash flow projection, the better your chances of getting a loan.

Personal Financing

Banks are all about credit history. Once someone has bad credit history, it is very hard for banks to start to trust them. This goes for most, if not all, banks. Much like a permanent criminal record, your credit history will also be open for the information of any bank that requires it.

Make sure that your own personal credit history is in order when seeking a business financing loan, because banks will definitely feel better about giving you a loan if your personal finances are a shining example of good credit.

Knowledge of the Five C’s

The five C’s include character, capacity, collateral, capital, and conditions. While character and capacity has already been explained above, the three other C’s are just as important.

Giving collateral that is best for the bank is something that all banks would prefer. When it comes to capital, this is in connection to the “capacity” part of the plan. If you are seeking a business financing loan as capital, the business plan must include how you will be using it.

If this is for expansion, include a detailed explanation of how you used your startup capital to get you to the point where you are now, which is the expansion part. When you show that you have made good use of your startup capital, they will be more at ease about giving you a loan.

The last C, which is Conditions, is your own personal knowledge of the field that your business is in, and even general subjects such as world economics and local trade. Showing that you are capable and knowledgeable will lead them to believe more in you and your business.

Additional Resources

Small Business Financial Assistance – U.S. Small Business Administration