Whether you’re leasing a commercial property or building a commercial building for your business, at some point you will require one or more commercial loans. It is vital that you build good relations and rapport with your Calgary banker to build up a solid business working relationship. Remember first and foremost that your banker is not your friend and they are not a business partner.
Understanding what your bank wants, expects and needs from you is more important than what you think you want them to know. Here are some tips to help you forge the best possible relationship with your banker and to understand their perspective when applying for a commercial business loan.
Prepare your Financing Objectives
If you need financing, the first thing to remember is that your first trip to introduce yourself to a lender and not apply for a loan when you first meet with them. You want to use your first business to begin building a relationship with them.
Each lender has their own commercial lending requirements so you want to know these are beforehand. Also, you should have a good idea of what you’re looking for in terms of financing. Being vague or uncertain about what you will need is not going to make a positive first impression, so your business plan should be already compiled and outlined both in depth and in detail.
Establish your Business Financing Loan Requirements
You will using this first visit as a fact finding step, so you should have detailed thoughts on what you will need for both short-term and long-term financing.
This means you will have to be clear on how you plan to use these loans whether it’s to be used for construction, upgrading, inventory, equipment etc. You will also have to consider how long you will need this financing, and be very realistic on how you plan to re-pay the loans. Telling the banker that your business idea is winner and will sell itself isn’t going to cut it with the banker. You need to back this up by showing your client base, contracts and marketing demographic research.
You also have a fall back strategy to be able to access other financial resources or assets to reduce any extraneous dependence on a loan if it should be turned.
Credit Worthiness
Banks wants to know that you are credit worthy. There are 5 major criteria they use and rate your credit worthiness. These include:
• Character – They want to now who you are and something about your training and any past experience you have relevant to the business you want to perform. This may also include detailed information on your key personnel in your company.
• Credit Rating – They want to know the credit core of both you and your business.
• Available Operating Capital – You have to advise the lender of all the capital available to you.
• Loan repayment – The lender will want to know how you intend to repay the loan.
• Collateral – They will information on what you can put up for collateral or any other guarantees you can provide.
Documentation Needed for a Commercial Loan
You will likely have to provide the following documentation for a commercial loan which includes:
• Income balance and cash flow statement,
• Obtain your credit reports beforehand,
• Three years copies of your income tax statements,
• Personal finance statement,
• Copies of both your marketing plan and business plan,
• A detailed breakdown of how the loan(s) is to be used
All this information should be presented in a professional package form that can easily be reviewed by the banker. Your proposal and the information you present should be concise and properly done.
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