5 Critical Steps to Obtaining Bank Funding Approval

FACT: 4 out of 5 business will fail within their first 5 years. Surveys prove that the main reason for business failure is lack of capital.

Here are the 5 critical steps to obtaining bank funding to build your business.

#1 Start With a Credible Foundation

The first thing you need to do when starting your business is to ensure you meet bank underwriting guidelines. This means having an appropriate business telephone number, business address, website and email to give your business a professional appearance.

Cell phones, residential addresses, and free gmail accounts are “red flags” that will result in your credit application’s denial.

FREE GUIDE: How to Set Up Your Business For MAXIMUM Credit

#2 Know What Lenders Want

Lenders are typically looking at 5 main points of your business to determine your approval. These 5 points are commonly known in the lending industry as the 5 “C”s of lending. Some sources can approve you for funding if you have only one of these C’s while most conventional lenders will want to see all five are present in your business before approving you.

The first “C” is cash-flow. Lenders want to lend money to a business that has already proven it can succeed.

The second “C” is collateral. Lenders truly want to see your business has collateral equal to or more than the money you are asking to borrow. Your business can have many types of collateral including equipment, credit card sales, inventory, account receivables, purchase orders, commercial real estate, or other types of collateral that a lender will find acceptable.

The third “C” lenders are looking for to determine your approval is good personal Credit. Lenders will review your personal credit in many cases to determine your approval.

The fourth “C” is business Credit. Lenders will check with the business credit reporting agencies to see what information they have on you. They would like to see that you have good business credit scores and profiles built that show paid-as-agreed tradelines.

#3 Establish a Good Bank Rating

Most business owners never know that they their business has its own bank credit. This credit is how banks rate your business. This rating will determine how much money the business is approved for when applying for credit and loans.

To get the best rating you will need to insure you don’t have regular or common NSFs on your bank account, and try to keep your bank balance as high as possible over a 3 month time period. Banks really want to see that you have an average daily account balance of $10,000 or higher over the last 3 months.

#4 Build Your Business Credit

You want to insure you focus on building a business credit profile and score for your business. This will help you get approved, and help you get approved for even more money. With business credit built you can have double the borrowing power as you can obtain credit personally, and for your business.

CASE STUDY: How to Set Up Your Business for Maximum Credit

#5 Apply for Lending Programs that Favor Your Business’ Strengths

When you apply at a conventional lender they want to review everything. They look at your business P&L statement, balance sheet, tax returns, business and personal financials, business and personal credit, revenue, collateral, and on, and on, and on.

What most business owners don’t know is that you can secure money for your business based on the strengths of your business, without having all these items reviewed.

Some businesses have collateral as their strengths including purchase orders, account receivables, credit card sales, equipment, inventory, commercial real estate, cash flow, or other business assets. Some business owners have 401ks, IRAs, or other securities they can use as their strength to secure funding.

Most types of legitimate business collateral can qualify a business for money. And this money can be secured more quickly than conventional financing, with less headaches, and a much greater chance of approval. Plus most of this type of financing is okay with you having no business credit built and challenged personal credit.

Work with a company who can offer you multitudes of financing options. And insure those options include collateral and asset based lending that lends you money based on your business strengths so you stand the best chance of being approved.

About The Author

Business Credit Coach

Brian Diez is a nationally recognized credit expert specializing in personal and business credit optimization. Brian is also the father, husband, and awesome friend.