Securing Your Business Loan

A Dual Perspective on Building Trust with Your Lender

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Securing Your Business Loan: A Dual Perspective on Building Trust with Your
Lender

Sept. 16th, 2024

Written by Eric J. Kundinger

Eric J. Kundinger is a seasoned real estate investor and financial consultant with over 10 years of experience in commercial banking. His expertise in both real estate and finance provides a unique dual perspective on building trust between lenders and borrowers. Eric emphasizes the importance of transparent communication and collaboration for strong financial relationships. Connect with Eric at ericjkundinger.com for more insights.

When seeking financing for your business, it’s crucial to remember that the relationship between you and your lender is a two-way street. While the bank evaluates your creditworthiness and ability to repay, you also have the opportunity to demonstrate that you’re a reliable partner. As a lender, I understand the importance of these interactions. But as someone who also sits on the side of the table as a customer, I know how vital it is to present yourself in a way that instills confidence in the lender. Here are a few key steps to show the bank that you’re serious about securing that loan which can lead to a much smoother approval process.

1. Professionalism is Key

From the moment you initiate contact with the bank, your professionalism sets the tone. This is your chance to prove that your business, and you as a leader, are credible and capable.

  • Prepare Thoroughly: Before meeting with your lender, ensure all necessary documents are in order. This includes your business plan, financial statements, tax returns, and any other required documentation. The more organized you are, the easier it will be for the lender to process your request. Have these items ready to be sent electronically when able. Bogging your lender down with a lot of paper does not make the process any faster. Be ready to send as much of the punch list request electronically as possible.
  • Presentation Matters: Whether meeting in person or virtually, maintain a professional demeanor. Dress appropriately, communicate clearly, and respect the time of your lender. Remember, they’re assessing you as much as your business.

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2. Communicate Clearly and Consistently

Communication is the cornerstone of any successful relationship, including that between a borrower and a lender.

  • Be Transparent: Provide clear and honest information about your business’s financial health, goals, and challenges. Banks appreciate transparency and are more likely to work with you if they trust that you’re providing accurate information.
  • Respond Promptly: Timeliness in communication is crucial. If your lender requests additional information or documents, respond as quickly as possible. This not only shows that you’re serious about securing the loan but also that you’re capable of managing deadlines—an important trait for any borrower. This is a common issue that slows down the process for all involved and usually leaves both sides frustrated at some point.

3. Meet Timelines for Bank Requests

Once the bank provides a punch list of items they need from you, it’s essential to meet these deadlines diligently.

  • Prioritize Their Requests: When a bank asks for additional documentation or clarification, it’s crucial to make it a top priority. This demonstrates your commitment to the process and helps keep the loan approval timeline on track.
  • Organize Your Responses: Provide the requested information in an organized and easy-to-review format. This minimizes back-and-forth communication and accelerates the decision-making process. Banks appreciate borrowers who make their job easier.

4. Demonstrate Financial Responsibility

Lenders want to see that you’re capable of managing your finances responsibly, both personally and professionally.

  • Show a Solid Financial History: Present a strong track record of financial management. This includes maintaining healthy cash flow, staying on top of debts, and having a clear plan for how you’ll use the loan funds effectively.
  • Provide Projections: Banks are interested in your ability to repay the loan. Providing realistic financial projections that demonstrate your business’s future growth and stability will give them confidence in your repayment capabilities.

5. Understand the Bank’s Perspective

Remember, the lender is assessing the risk of lending to you. Show that you understand their concerns and are prepared to address them.

  • Discuss Potential Risks: Be upfront about potential risks to your business and how you plan to mitigate them. This proactive approach can build trust and demonstrate that you’re thinking ahead.
  • Be Flexible: Sometimes, the bank may request changes to your loan terms or require additional collateral. Be open to negotiation and willing to find a solution that works for both parties.

6. Maintain Professionalism After Approval

Even after your loan is approved, maintaining professionalism is essential.

  • Keep the Bank Informed: Regularly update your lender on your business’s progress, especially if there are significant changes. This keeps the lines of communication open and strengthens your relationship with the bank.
  • Meet Your Obligations: Make timely payments and adhere to any other conditions of the loan. Your performance during the loan period will influence your future borrowing potential.

Conclusion

Securing a business loan requires more than just meeting the bank’s criteria; it’s about building a relationship based on trust, professionalism, and clear communication. By approaching the process from both the lender’s and the customer’s perspective, you can better understand what’s expected of you and how to present yourself as a credible and reliable borrower. Remember, the goal is to make the lender feel confident in their decision to finance your business. The more prepared, transparent, and responsive you are, the smoother the process will be—and the more likely you are to secure the financing your business needs.

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