Once you understand how the banker looks at lending, you can tailor your presentation to improve your chances of obtaining a loan. Loan Criteria Bankers look at three main criteria. The first is collateral. As a business owner, you can expect to personally guarantee all business loans, regardless of how long you have been in business. You will also have to offer any equipment you are purchasing, existing equipment and furniture, receivables, inventory, patents, and any other business possessions as collateral.
Bankers are reluctant to make unsecured loans to small businesses.
Insufficient collateral can ruin a potential loan, even if you have a great credit rating. The second criteria a banker evaluates is ability to repay the loan. While you are looking at the funds you need to expand or purchase equipment, the banker is concerned about how you will repay any money he lends to you. In other words, you need to show the banker that you have considered the bank s situation, and have a plan for how you will repay the loan and still pay the bills and yourself on the remaining cash flow. Remember to list the assumptions for your projections, so the banker can evaluate their reasonableness.