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Approaching a bank for financing

portfolio37194029.jpgIf you are getting ready to open your own business or you are trying to expand your business, you are going to need to have some type of financing. One of the most common ways to obtain financing for your business is to go to a bank and apply for a loan. Many business owners find that approaching a bank for financing for your business can be an intimidating process. Here are some tips you can follow to approach a bank for financing.

Tip one:
You will need to have a valid reason as to why you need the money. The first thing that any bank is going to ask you is why you want the money so you should be prepared ahead of time to answer that question. When answering the question you will want to be honest with the loan officer, but you also do not want to sound frivolous, so make sure that it is a valid reason.

Tip two:
Talk to the bank about your business so you can see if they are knowledgeable about business in general, but also so they get an idea about what your business is trying to do. You want to talk to the loan officer about your business's history, your business's marketing strategy, the conditions of your business, and what you hope to accomplish in the future with your business. When talking to the loan officer you will want to give them a copy of your profit and loss statement and your cash flow statement so they can get an idea of how financially sound your business is. If you are just starting, a business you will want to give them estimated cash flow statements so they can see how you expect your business to perform. Remember to always lean towards the conservative side when estimating numbers.

Tip three:
Before you go into the bank and have a formal meeting with a loan officer, you should talk to the loan officer to see if you can meet informally. This is a great idea because it will give you a chance to meet somewhere neutral and break the ice, so that when you do go in for the formal meeting you can focus on your plans for getting a loan rather than being nervous about meeting somebody for the first time. It doesn't hurt if you come to the informal meeting with a loan request and a one-page business plan summary. This will give the loan officer some background information on your business before the meeting.

Tip four:
You need to be informed about the various types of loans that the bank is willing to issue. By having, an understanding about the types of loans that the bank issues you will be able to request the loan that will work the best for your company and suggest a few other possibilities that might work. When learning about the various loan options make sure you find out about the repayment terms, so you can choose one that has the repayment terms that you can use for your company.

Tip five:
Do some research to find out about how the bank makes their decision on whether to grant the loan or not. You are going to find out what factors the bank uses when considering loan applications and make sure your business meets those factors. Some of the more common factors that banks consider are marketing strategy, any collateral that you can put down, how much capital you have invested into your business, your determination, how much money they can make on your proposed loan, and many others.

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