Buying a business? It’s likely you will be requesting a business loan. Knowing the most common reasons why loans fail may help with your success. We’ll start at the top with the very basic causes.
Why Small Business Loans Fail
- No credit/bad credit
- Shortage of collateral
- Non sufficient cash flow
- Minimal loan amount
- Lack of Preparation
Our focus will be “Lack of Preparation”. First impressions are lasting impressions. There are no exceptions when it comes to requesting a bank loan. One of many roles a business brokers plays in a business transaction is assisting the buyer. Most buyers know of several commercial loan options. Knowing the lenders that make a large amount of business acquisitions can make the difference. If you simply ask “Do you make loans for the purchase of a business?”, most will answer yes.The key is knowing the banks that specialize in this arena. You can spin your wheels supplying bankers with mountains of paperwork to later find your loan “does not fit their criteria”. A business brokers lives in this world. They can save a buyer much time and effort. Go directly to banks that will compete for your business.
How to Prepare a Loan Proposal
Getting a loan requires sales skills. A good presentation is key. Knowing your product is essential. Your proposal should be similar to a sales presentation. Make sure to include the following items:
- Executive Summary
- Business Profile
- Your Resume
- Management Description – experience and roles
- Loan Request – Amount, uses
- Loan Repayment Plan
- List of Collateral – Business assets
- Personal Financial Statement
- Business Financial Statement – 3 years
- Projections – cash flow
Your goal in preparing a loan proposal is to show your business is a sound investment. This extra effort will generate solid returns. A great resource for a proposal is the SBA. Here you will find forms and other presentation tools.
Chris Kerth begins the sales process with a Free, No-Obligation Market Analysis. We only get paid when the deal closes.
Let Chris Kerth and Murphy Business sell you’re Business.