December 06, 2001
By: Bev Dodd
Commercial loan: Get to know your lender
Whether your company is a high-tech Internet start-up or an established manufacturer, a commercial loan is sometimes necessary to propel your business to the next stage of growth. Carefully evaluate your needs and purpose for a commercial loan. We'll discuss this more below.
Before you talk to the bank about your commercial loan, consult your accountant to help prepare projected cash flows to determine your estimated future revenues. Never tell a lender that you want to borrow as much money as possible. Rather, you should have a specific amount in mind and the paperwork to show why you need it and how you will pay it back. Realize that you or your company will be required to finance a portion of the project costs.
Make sure that you request enough money to complete the planned task with your commercial loan. While you don't want to borrow too much money (extra cost of interest) it doesn't do any good to borrow $30, 000 to buy a $50, 000 piece of equipment if you don't have other resources to make up the difference. This may sound simple but it is particularly difficult when you are providing funding for operational activities that are likely to be variable in costs.
Get to know your bank before applying for a commercial loan. Your bank loan officer makes money by lending money. They know that a healthy, growing small business may take out several commercial loans in the future and be a solid merchant customer as well. They also know that small businesses don't always stay small. The lender also may be under increased pressure to build loan volume as banks continue to consolidate. Supply the lender the proper documentation for your commercial loan, that way they can make an informed decision.
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