How to communicate with the Bank through the fulfillment of the criteria for Loan

At the bank meeting with the jury and the loan officer in charge, this is the time to deliberate and decide on whether you meet their criteria or not. I don’t need to remind you of how to dress for such a memorable event that will either make your business dream, or mar it. Dress moderately and neatly too to create your first impression that you are a neat person. In fact, as if you are going for a job interview, because you are going to face the panel of professionals who understand what first impression means in a day like this, so try to measure up 80 percent on appearance assessment score .

Be organized, and organize your documents properly. Don’t rush into the hall late, sweating all over, with your files containing your documents soaked and stained with your sweat, almost all your documents turn up-side down. You must have your letter ready for the bank containing all the detailed materials that you intend to submit, and never rush-write any piece of information in their presence, which may send a wrong signal of you as an un-organized person that may by implication suggest that you cannot organize whichever fund given to you as loan. Bank as a financial institution don’t just dish out fund to any body, because in business, full time, so they put their money where their mouth is, goes the saying.

Be ready to have discussions with the loan officer, sharing and reviewing your documents with the loan approval authority and colleagues on credit committee for full assessment of your details.

After assessing your documents, the next is your current relationship with the bank, having an account with the bank in question is an added advantages. But if you don’t have account with the bank already, agree to establish one if your application for loan offer is granted, because having an account with the bank will enable you know your credit score before going to the bank for the meeting proper, as that would have made you know your shortcomings and discuss them.

In granting loan to customers, banks usually assumed they are in the fourth to fifth tier when it comes to financing a project. They are of the opinion that the owner of the business and business , the owner’s family, and friends, investors (known as angels), home equity loans, before the bank comes in. Although, the bank is not shying away from giving loan, but wants to be sure that the funds you previously had from other sources give a pointer of good history on how you meticulously used them, so that they can be sure you will carefully use any money given to you in the form of loan by the bank.

The reason is to see that the funds for your business is a combination of funds from other sources and that of the bank to enable you apply caution and prudence in spending. In the totality, the bank expects that 20 percent comes from other sources, while the other 80 percent should come from the bank.

Next is the amount of collateral expect to be available for easy processing of your loan. To best calculate the figure of the collateral, take this illustration: Mr Saliu Emmanuel, the CEO of Saliu Emmanuel-Concept intends to expand his business through creating another branch. He has fulfilled the bank requirement for granting lose worth $50,000,000.00 plus 25 percent as collateral. Calculate the bank collateral demand:

$

Loan size = 50000000

25 % of 50000000 = 12500000

Therefore: Collateral = 62500000

Collateral = loan size + 25 percent

Note that collateral is a value in form of intangible assets eg, bank accounts and investment or an easily convertible tangible assets, which depends on the bank. A personal guarantee, that translate to a promise by the owners of the business to pay the debt from the personal assets, should the business could not measure-up with the promise to pay.

Different banks with different structured policies regarding giving out loan. While some banks will insist that the business must be cash flow positive at the time of the loan, others requires that the applicant must be cash flow positive, taking into consideration all funding source’s income and business, so that the bank can relax and be sure that the loan will be repaid as at when due from several sources, because several banks prefer to base decisions on current cash flow rather than projected one.

One point you must not forget in a hurry is the fact that most times they may make an exception for material franchise operations, which means, generally that they are only interested in an on=going operations with the minimum of six to twelve months experience in the business. Although, there are banks that lend to start-up business, but the condition is that you must present your house as collateral, and it is difficult to acquire such loans, because most banks don’t honor it as valid guarantee.