Questions to Ask Lenders
Applying for a small business loan is a lot like applying to a job. You must be ready, on the ball, and prepared to answer any questions that may be thrown at you. Read on to find out the questions you should ask yourself in preparation.
How's my personal credit?
Since how you handle your personal finances is a good indicator of how you'll handle your business finances, its not surprise that lenders will want to see documentation of good personal credit. If your credit is less than favorable, get it back on track before applying. Run a free credit check (many companies will do it for you for free online) to track areas in which you could improve. A couple ideas: pay off debts to increase your debt-credit ratio and dispute late payments to get them off your record.
What experience do I have?
You don't need a PhD to get a business loan, but relevant experience in your business' field helps. Specify the education or experience you have and how it will help you run your business effectively.
What is my plan of attack?
Perhaps the most important part of your presentation is your overall business plan. You need to outline your purpose of starting a business, why your business will succeed, your target market, and your sales forecast. The most important aspect to relay is that by lending to you, the lender is not entering a high-risk situation.
What am I going to do with the money?
You'll need to account for every dollar you plan on borrowing. Whether it's being used for operations, marketing, paying off debts, or buying equipment, you'll need to explain why each dollar is important and necessary.
How do I plan on repaying the loan?
A proper sales forecast can help with your explanation of how your business will become profitable enough to pay off the money you borrowed.
How will I handle the rejection?
If you are turned down for the loan, it's important that you don't give up! Ask the lenders for specific reasons why they turned you down. This will help you tweak your presentation, business plan, etc for your next interview. Remember, determination could also be a factor they are looking for.