Though it may be easy to find a bank that provides business loans, it is best to make sure you find an institution that fits who you are, what you are doing and where you are going. If you are looking to borrow money to finance your business growth, here are five smart questions to ask potential lenders.
1. Are you really prepared to meet my lending needs?
If I needed money today, would you be able to provide it? This is an important question for every business owner to ask a potential lender. You need to make sure your bank has the resources to finance not just your business, but many others.
2. Do you understand my reason for borrowing?
Some institutions will not lend to casinos, others do not fund restaurant ventures or acquisition loans. You want to make sure your bank knows what industry you are in and why you need more capital. It is a mistake to not be honest and precise when talking to your lender about a possible loan.
3. What are the risks to loan repayment?
There are many financial risks, and there are many variables. Your lender should help you pinpoint the risks you face as well as assess where your business stands. How much debt does your business have today? Iis your industry to the business cycle? Are changes in technology something that could disrupt your ability to grow?
4. Can these risks be mitigated without adding tough terms to your loan agreement?
Once you have identified and assessed the risks, you can work with your lender to mitigate them. This part of the conversation usually boils down to adding on collateral and guarantees as terms of your loan. Ask your lender for ways to avoid placing an undue financial burden on you in the event your business fails.
5. Do you trust me?
Cultivate a reputation for openness and honesty with your lender.