Borrowing Money as a Small Businessman

There's really no shortage of banks out there that offer small business loans; still, you have to realize that borrowing money, going to an institution that doesn't actually specialize in small business loans can really leave you shortchanged. The thing is, to lenders, how familiar they happen to be with a particular industry affects their confidence lending to that industry a great deal. Your typical bank isn't going to be all that familiar with the small business lender; consequently, you find that they charge some of the highest rates. So how do you know if a bank that you go to has the expertise with or familiarity in the small business arena. Once you establish that the lender the bank is willing to consider your application, you need to ask to make sure that you are at the right place.

The first question you need to ask is, if your bank really has the resources at the moment to help you. There are so many small businesses riding the recovery wave trying to borrow money at this time that your bank might well be swamped. You need to make sure that your bank is in a state of readiness. Banks don't just try to judge a borrower for his ability to pay. They also try to judge him for his willingness to pay. If the borrower does have the money to repay the bank with, will he? That isn't always a given. You need to work with the lender at the bank to make sure that they have no questions about your moralilty or your character. Whatever they need to know to establish that you will be willing to work with them if you happen to run short, you need to give it to them. That would be a repayment history, a credit history, great references.

The banks like to work with industries that they are familiar with. Banks that work with small business borrowers have specific preferences in that category as well. For instance, some banks do not like restaurant ventures. Others don't like small businesses involved in anything other than technology. When you talk about borrowing money, you need to talk about the specific industry that you're involved and the specific purpose you will be borrowing money for. If it is to make payroll, you need to explain how exactly things got to a position where you need to borrow money for a foreseeable expense. Either way, you need to make sure that the bank you are in talks with is comfortable working with your kind of industry and with the kind of purpose you have in mind.

The bank is likely to have questions about your exact cash position, the amount of money you are looking for and your reason for it. Make sure that you ask the bank if they are satisfied with your financials. If they have any kind of doubt about the data that you have provided, you might offer to have your records certified by a CPA.

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