For starters, the majority of banks won’t lend to startups. Your business will have to have been operating for at least three years and, have been profitable
Q): Dear Meyer, My business is now in growth mode and we need outside funding to allow us to reach our potential. Is a bank loan an option for us? And what do I need to know going in?
A): A bank loan can indeed be an option but there are a number of requirements that your business will need to meet first. For starters, the majority of banks won’t lend to startups. Your business will have to have been operating for at least three years and, have been profitable during those three years. Your tax records will have to be comprehensive and meticulously kept by a professional accounting firm.
These are just the basic requirements, whichever bank you go to will have more detailed obligations that will have to be fulfilled before they will lend to you.
If your business meets the above requirements you should begin drawing on a line of credit as soon as possible. The reason is that the longer and more extensive your credit history, the more funding options that open up for you down the road.
When you begin the loan process and throughout your future bank dealings, it’s extremely important for you to be completely honest and upfront with your banker. The more information and documentation that you share, the less likely it will be that you will end up with unforeseen complications.
Once you’ve established a successful relationship with a bank, it is to your advantage to do whatever you can to keep that relationship strong. You will have learned by then how difficult the process of getting a loan can be and the incentive to not have to do it all over again will therefore have become obvious to you.
The utilization of bank credit can end up being the difference maker that takes your business to the next level and it is something that every business should take seriously.
Meyer Eichler serves as Senior Vice President of Signature Bank, a full-service commercial bank with 23 private client offices throughout the New York metropolitan area. Meyer is a CHYE mentor and offers guidance on all matters pertaining to funding and operating your business.
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