Is this the year you have resolved to start your own business?
First, I suggest you get to know four people:
- A banker
- A CPA
- An insurance agent
- An attorney
Building good relationships with these invaluable resources will help you and your business succeed.
Now, let’s talk about applying for your business loan.
Prepare a solid business plan
Before you apply for a business loan, you need to have a good business plan. A lender’s main concern: are you going to be able to repay the loan? You need to be clear on how you plan to build and sustain your business.
Understand what lenders look for
When deciding to loan you money, most lenders look at the five C’s of credit.
- Credit – Your credit report is a detailed list of your credit history and provides insight on how you manage credit and make payments. Lenders are looking to see if you pay back your creditors.
- Capacity – Do you have the means to repay your loan? How much debt do you have compared to how much you earn? Lenders want to know if you can comfortably manage your loan payments.
- Character – Character is tough for a lender to assess in the brief time loans are considered. This is where a good-standing relationship with a banker, who is likely to be your lender, is beneficial. They want to know if you are trustworthy. Will you repay your loan? Lenders will review all available information, such as credit reports and public records, to see if you’ve met past obligations or have a history of legal problems.
- Conditions – These are economic and other outside circumstances that may affect your ability to repay, like your business industry, the local market and competition to see how your business may fare.
- Capital – Do you have some of your own assets invested or a financial base to help you weather changes in the marketplace? Trying to start or sustain a business without any owner investment is considered very risky – what’s to keep you from walking away in hard times? Most lenders want to see some financial investment from the business owner.
While you want to score as high as possible on each of the five C’s, all loans are different and not every borrower will have an A+ rating on each category. Having high scores on some factors may compensate for less-than-perfect scores on others. The key is to be open and honest with your lender.
If you’re interested in starting a small business, check out local resources available to help, such as:
- The SBA Score Program – free mentoring and education for aspiring entrepreneurs and business owners.
- Oklahoma Small Business Development Center – helps you think, start, grow and reinvent your small business.
- Kansas Small Business Development Center – Start, grow and learn about business.
- Technology schools, community colleges, universities – business and industry training services to help you get a better understanding and foundation for business.
Oklahoma colleges and universities
Kansas public colleges and universities.
Our lenders and business services representatives are happy to answer your questions, even if you are not an RCB Bank customer. Connect with a lender and/or business services representative in your area.