The approval of your small business loan request can largely depend on your meeting with the lender. This is especially true if you apply for a small business loan with a traditional bank like Chase or Bank of America. When speaking to a lender about your business, it’s important to know your business inside and out. They will throw tough questions at you and you’ll need to know how to answer them. One wrong answer can kill the entire deal. There are also a number of things you shouldn’t say to a lender when meeting with them about your small business loan request. Here’s a list of those things:
- “I Don’t Know Exactly What I Need” – Never let a lender know that you are unsure of the amount of the small business loan you actually need. This makes you sound unprepared. Before applying for a business loan, I suggest working with an accountant to develop financial projections. Your financial projections will give you a firm idea of the total amount of funding you need.
- “I’ll Take What I Can Get” – Again, this sounds like you are unprepared. It isn’t wise to apply for a small business loan without knowing the exact amount you need and what it will be spent on. Knowing what amount you need will also help you figure out how long it will take you to pay back the small business loan. You don’t want to take what you can get, you want to borrow what you can afford to pay back.
- “I Haven’t Put Much of My Own Money into the Business” – This is a huge no-no. Most lenders want to lend to small business owners that have skin in the game. Often times they don’t want to issue a small business loan to a business owner that hasn’t risked his or her own money. If you don’t invest your own funds into the business, what makes you think someone else will?
- “I Don’t Have a Business Plan” – Most traditional banks like Chase or Bank or America will ask to see your business plan when applying for a small business loan. If you don’t have a business plan, you’ll need to develop one before you apply. Applying for a small business loan without a business plan also makes you look like you’re unprepared. If you’re not sure of how to write a business plan, I suggest working with an expert (usually an accountant or former banker) to help you.
- “The Business is Struggling but a Loan Will Change That” – If your business is struggling that can indicate it’s on the verge of failure. A lender will not want to approve you for a small business loan if you tell them your business is struggling. If it’s struggling, chances are there are other issues that have nothing to do with money. Getting a small business loan isn’t going to help fix those issues.
- “I Am Going to Spend the Money On [Insert Personal Item Here]” – I had a client tell a lender that he needed to pay his ex-wife $150,000 by the end of the month otherwise the judge would hold him in contempt. This was after the lender already approved him for $150,000. By the end of the meeting, the approval had been revoked and my client was in a panic. He basically told the lender he had no intention of using the loan for his business, rather to pay off his ex-wife who was attempting to suck him dry. Never tell a lender you are going to use a business loan to pay off a personal debt. The loan is supposed to be used to help grow your business.
The bottom line is that you shouldn’t say much in your interview with a lender. Only speak when spoken to. Basically, just focus on answering the lender’s questions. Once the question has been answered, stop talking (to avoid saying the wrong thing). Don’t give out information that you don’t have to. You may improve your chances of getting approved for a small business loan if you do this.