Getting A Loan For Your Business: 20 Questions Bankers Will Ask

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If you just launched your business, read 6 Ways to Finance your startup.

You have been running a small company for a couple of years now, with a product or service already on the market. You may be applying for a loan to fill short-term liquidity needs, to buy equipment or inventory, to make a real estate investment, to expand or grow your business. However before qualifying you for a loan there are at least 20 questions commercial account managers will either ask you or themselves:

1.       Do you have a relevant business model? Is there a market for your product? What are your chances of success?
2.       What are your revenue projections? Are they realistic? How are you going to meet those expectations? On which market hypotheses are they based?
3.       How much do you know about the competition? How do you distinguish yourself?
4.       How much cash have you already put in the business?
5.       How much do you pay yourself and how much do you re-invest in the company? Why?
6.       How do you price your product or service?
7.       What do your monthly cash flows look like?
8.       What do financial statements say about your company’s

  • Profitability: How much profit do you make out of each sale?
  • Liquidity: Do you have enough money to meet your short-term liabilities when they come due?
  • Turnover: How fast do you collect your receivables, how often do you renew your inventory? How much revenue is generated for every dollar’s worth of assets?
  • Leverage: How much of your funds come from borrowing? Do you have excessive debts?
  • Burn rate: How fast do you use up capital to pay for overhead before making positive cash flows?

The bank will also want to know you better:

 9.    Can your account manager trust you?
10.   Do you have any expertise in the business?
11.   How good is your sales pitch? Can you explain your business in comprehensible terms?
12.   Are you organized?
13.   What does your work environment look like?
14.   Do you know your numbers or are you always referring to your accountant?
15.   Do you fill forms in a professional and timely manner?
16.   How fast do you respond to phone calls and emails?

Finally, there are some deal breakers that can reduce your chances of getting a loan:

17.   Do you have a poor credit history (previous delinquency or bankruptcy)?
18.   Do you have a criminal record?
19.   Is your business in a very competitive industry (e.g. restaurant, retail, beauty)?
20.   Can your business affect the bank’s reputation (e.g. a sex or alcohol-based business)?

 

Thanks to Jean-Philippe Bujold, Account Manager for small businesses, for endorsing this article. 

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