Traditionally bankers look at what are the three “C’s”: character, credit and collateral. Character means more than not with a criminal record. It means that the banker confident that you will not suddenly disappear from parts unknown, if the company gets into trouble, feels. Specifically, bankers like to see the ties to the community, as long residence, family ties, and home ownership. A clean credit history is important. A couple of late payments by credit card should not be a criterion, but missing mortgage payments for three months in a row to demand a good explanation. Bankers like good character and good credit, but they live on fixed assets.Equipment, buildings and vehicles – this is the kind of stuff that bankers might for collateral – solid value and probably worth a lot, even if the company goes bust will be. Inventory, raw materials and goods are second choice for safety – they will lose their value faster than assets, but still worth something.
Can you get a business loan?
The criteria for business loans varies much more widely than for consumer loans and often varies quite a bit from one banker to the next at even the same bank! However here are some rules of thumbs to give you an idea of your chances of getting a loan.
Banks have much more lenient standards for lending to consumers than to businesses. So what you can do is borrow the money from the bank as a consumer and then turn around and personally invest the funds in your business. Just make sure that you never lie how about you are going to use the proceeds on a loan application. For example you could apply for a home equity loan to tap any available equity in your house. Then take the funds and invest them in your business. The bank feels safer because their statistics show that home equity loans or much more likely to be repaid than loans for brand new businesses. No equity in your home? Maybe you can get a car loan?
Getting an appointment with a bank
Don’t just show up in person–first make an appointment by phone. Ask the receptionist in the bank or the loan department for the name of the appropriate person who would handle your loan request. Of course it would be better, but not necessary, to get a referral from a friend or advisor such as your lawyer or accountant. When you get the name of the appropriate loan officer simply ask for an appointment. Don’t offer any more details over the phone, unless the loan officer requests them. The more details you offer over the phone, the greater the chances you won’t get the appointment at all. Sound confident. Sound matter of fact. Sound like you don’t even need the money… that’s the kind of person that loan officers like to lend to.
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