Puffer Web

The Paycheck Protection Program (PPP) loan volume was something many financial industry veterans had never seen in their careers. Many witnessed firsthand how the PPP loans provided to businesses were able to help the local community and the businesses in need. The current economic climate continues to be impacted by the Covid-19 pandemic, requiring many small businesses to explore new financing options to keep their doors open and ensure their long-term viability.

While the Paycheck Protection Program has provided approximately $512 billion to 4.6 million businesses, including thousands here in the Triad, these federal funds have limited uses and may not meet the needs of all businesses. Traditional loans remain a viable option for many small to mid-size businesses that are seeking operating capital. When seeking out a loan, it is recommended all businesses take these steps to prepare.

1: Prepare your financials.

When evaluating a business for a loan, all banks will take a detailed look at your financial performance and stability. While every bank may have slightly different needs, most will request:

• Income (profit and loss statements going back at least three years).
• Revenue projections for at least the next three years.
• Bank statements going back at least three years.
• Tax returns going back at least three years.
• Credit report.
• Records of any previous loans and the amount still owed.
• Personal financial records (for most small business owners).

2: Assess your reputation and visibility.

Beyond preparing your financial documentation, take a step back, and look at the business from an outsider’s perspective. Many lenders will look at a company’s online presence and other publicly available information to learn more about it and the leaders, and to gauge its long-term prospects. Make sure your company website is up to date and accurately reflects what the business does. Assess your social media accounts and your ratings on sites, such as Yelp and GlassDoor. Request a copy of your business’s credit report through an agency like Dun & Bradstreet and work to proactively correct any issues.

3: Know your business plan.

Another important step to take before filling out the first loan application is to make sure to create or reassess your company’s business plan. This does not need to be a formal presentation, but be prepared to discuss both short and long-term goals for the business; major losses or other challenges that have been faced; projected revenue with your strategy to sustain and increase revenue; industry-specific items, such as market analysis or product differentiators; and key management within the business. Developing the business plan should also help with one of the most critical aspects of the loan application process — determining how much of a loan is needed, how the funding will be used and the projected impact on the business.

4: Get to know the lender and requirements.

While the general documents and financial records lenders will want to see are fairly consistent across banks, each institution sets its own individual criteria and requirements for evaluating loans. When evaluating banks to apply for a loan, ask questions up front to determine if there are minimum loan amounts or how decisions will be made. By getting to know your lender beforehand, you may have an opportunity to discuss structures, ideas or a strategy that is more beneficial to your company goals.

Smaller community banks often have more flexibility in their lending requirements than larger institutions, which may have a more strict financial formula. Experienced community bankers can understand and advocate for your business on a case-by-case basis.

Applying for a business loan can be a stressful situation, even in the best business climate. The good news is that banks are still lending, and by following these steps, businesses will reduce some of the stress and enhance the probability of access to the capital they need to get through this Covid-19 pandemic and prepare for the future.