Obtaining the money you need to fuel business growth may be easier than you think.
Banks do want to help you find the right banking solution for your needs. Small businesses are important to financial institutions and they want to see entrepreneurs succeed. All you need to do is understand what banks typically look for in an application for financing so you can enter the process well prepared.
Increase your chances of financing success and help the bank to say ‘yes’ to your request with these suggestions to improve an application.
Complete a business plan
The vision for your business may be clear in your head but your banker will want to see it on paper.
Spend the time to complete a basic business plan. It should describe your vision, strategy, goals, product/service, competition, management team, employees, advisors, the amount of money you seek, and how you intend to use the funds. It should include projected financial statements (income statement, cash flow and balance sheet) using conservative future estimates for revenue, expenses and profit.
Use tools such as the Scotia Plan Writer for business to create a document you can share.
Be prepared to answer specific questions about your plan. The more information you can provide to your business banker the more he or she will able to assist you.
Look at your credit rating
If your business has two or more years of financial history it may be eligible for financing without a personal guarantee. If not, the bank may factor in your personal credit history as part of the application.
It’s good practice to check your personal credit rating before applying for bank financing. (Checking your credit report annually can also help to detect identity theft.) Major credit bureaus in Canada include Equifax and TransUnion – for a small fee you can instantly download a copy of your personal credit report and the lending ‘score’ used by some banks to assess your credit worthiness.
Commercial credit reports on your existing business are available from Equifax, TransUnion and D&B .
Carefully review your credit history for any inaccuracies or items you feel should not appear. Contact the credit bureau to address any concerns. Knowing what’s on your credit report will make it easier to talk with your banker about any items before a credit application is submitted.
Depending on the purpose of the funds being requested, the bank may want you to offer some personal collateral to help secure a loan, line of credit, overdraft account or commercial credit card. Collateral may include personal or investment assets. Consider your comfort level regarding personal security and be prepared to discuss it.
Most financial institutions can process your credit application in very little time, but it never hurts to put in your application to the bank long before you need the money. It’s important to allow enough time to prepare a thorough credit application, meet with your small business banker and respond to any requests for additional information or paperwork.
For all of your business financing needs please see a Scotiabank Small Business Advisor. He or she will discuss various credit facilities and services that may be available to you.
Got any financing tips to share? Please start a discussion in our Get Growing For Business Discussion Group on LinkedIn.