1. Historical context
Banks want to know who you are, what you’ve done, and how your business has performed. They’re looking for both concrete and intangible qualities.
The following are some of the most frequently asked questions:
- How long have you been working in this field?
- What did you do before starting your business?
- What is the purpose of your company?
- In your business, how do you make money?
- Is it possible for your company to function without you?
Bennett said, “Bankers want to get a sense of who you are.” If you can back up your prior achievements with facts and disclose your shortcomings, they will have a greater picture of who you are.
Bankers want to know whether you and your team has the right mix of skills and experience. Sharing your project and people management skills might be beneficial if you’ve only been in company for a few years but have 20 years of technical knowledge. If you’re more of a technical than a salesperson, mentioning that you have a seasoned salesperson on staff who can help you grow the company may help make up for your lack of sales.
You should also be able to show that the business can run without you.
2. Market research
Knowledge of your sector and any unique challenges it faces, as well as who your rivals are and how to establish trust,” Bennett added.
Bankers often ask questions such as these:
- So, tell me more about what you have to offer.
- What motivates individuals to purchase goods?
- What is the size of your target market?
- Who are your primary rivals?
- What sets you apart from others?
According to Bennett, when a textile company applied for a loan, Middlesex bankers enquired about how the things it would sell might be manufactured elsewhere and brought to the US for local sale. They were also interested in learning how exporting foreign items might help the company.
3. Financials
According to Entrepreneur, “the presence of a solid, well-documented cash flow that will be more than sufficient to fulfill a loan’s scheduled principle and interest is one of the most persuasive things you can demonstrate to a lender is the presence of a solid, well-documented cash flow that will be more than sufficient to fulfill a loan’s scheduled principle and interest is one of the most persuasive things you can demonstrate to a lender is the presence of a solid, well-documented cash flow that will
Financial statements issued by a reputable certified public accounting company, according to Bennett, are especially reliable.
“We want to make certain that the firm’s owner can interact with those individuals as well.” “Knowledge equals credibility,” he said.
Entrepreneurs with small businesses should be prepared to address queries like these:
- What causes the price of goods to fluctuate?
- Why did you defraud the firm of such a significant quantity of money?
- How are you preparing your financial statements to weather a downturn in the economy?
If you’re forecasting for a bank, be sure your assumptions are sound. While lenders will want to see that each location can function independently so that the whole company isn’t reliant on a single place, according to Bennett, lenders will also want to see that each region can provide a range of goods and services.
4. Challenges
Bennett said, “It’s feasible for business owners to have rose-colored spectacles.” “What challenges will they face in the marketplace?” “As people and businesses, we’d want to learn about their apparent defects.”
If you’re good at engineering but not so good at managing your company’s finances, you should explain why and what you plan to do about it, which may involve hiring a smart accountant or even a temporary CFO. Describe how you collaborate with a partner who compensates for your lack of organizational skills.
5. The funds will be used wisely.
When completing a loan request, you must clearly explain the following, according to a US Small Business Administration website:
- How much cash do you need?
- What do you intend to do with the money if you win?
- How do you intend to return the loan?
- What will you do if your business is unable to repay the loan?
Bankers want to see that you’ve invested personal funds in your company and plan to do so in the future. They also want to know that the money you borrow will be put to good use.