S6E8: Unlocking 'Yes': Secrets to Securing a Business Loan from Your Bank

Disclaimer: The information in this video should not be viewed and is not intended as tax/financial advice. Consult with an expert before making any decisions regarding your finances. 

Tired of hearing “no” from lenders?
It’s not just about the application — it’s about how you manage your money. From tightening up cash flow to leveraging your assets the right way, here’s how to start getting to “yes.”

Transcript

0:00

If you're in business and you've only been in business for a short while and you don't have a good five, six, seven year history with millions of dollars in cash flow flowing through your accounts positively and your cash balances increase, and in other words, if you're not in a situation where you actually don't need the money, a bank is going to always require a good credit score from you because they're going to require a personal guarantee. So what you want to do is look up online and this changes a lot. So I'll have you look it up online, know your credit score and know how that's going to what the banks are going to do when they see that credit score. Hey, welcome back to Cash Flow and great topic this week. You're going to love it. I'm going to teach you how to make absolutely sure that you get a no as an answer from the bank when you go and ask for a loan. And I will tell you that I've seen this happen over and over and over again. I just want to give you some tips to bypass some of these problems that are so easy to get in place and actually get you to yes. So what are a couple things that'll absolutely guarantee you that no bank's going to want to lend you money ever, no matter what? And these are examples from real life. Okay, so I'll get a call from people either like on an initial consultation call or before they become a client, and I'll say, well, you know, what did you say to the bank? Where did you go? What did you bring with you? How did you answer the questions? And it becomes clear really, really quickly why the bank said no. And the flip side of this is there are a set of things you can do. Boom, boom, boom, boom, boom, and a nice little list that'll really elevate your chances of getting a yes. There's no guarantee. And it could be your financial situation is dire enough that there's not a bank loan to get and you have to revert to some other options. But, you know, that is a great first line of defense. Either an increased credit line with your bank or an actual term loan from your bank. And it depends on the bank and the circumstances, they'll do one or the other. So what could you do? Make sure you don't get one. So most notably, don't have any financials, don't have an income statement, don't have a balance sheet, don't have bookkeeping. Right. That'll. That, that'll get you A no on top of that, just kind of drop in quickly, act rushed and like you really need to get this done fast. And if you really want to expedite the no, do this online and not in person at a local bank that might know you or a local branch of a national bank that might know you. The other thing is don't use the wrong words. Don't say, I need, I need, I need, I need. That is absolutely the wrong answer. What you want to remember here is that the bank is looking to make money and they make money because you can pay them back. And if you're in need, you're not necessarily looking out for their interests right now. So stay away from those two words, I need. But that has come up in conversation. They know what that means, is I need this to survive. Okay, don't have your tax returns caught up and have a good bit of really sketchy lending history in the recent past with some of it still on your books. You know the ones I'm talking about where they call and they say, hey, we can get you$600,000 tomorrow in a 40 year loan. And by the time you're done, you've gotten $6,000 and your interest rate is 50% and it's going to take you three years to pay it off. So these are all the things kind of amalgamated into a. Hey, walk into a bank with this, you're guaranteed to get a no. But how do you get a yes? Right? What are some of the things you can do to lay out a path to getting a yes? They're not that complicated. This is actually going to be a pretty short episode because I want you to just take a pen and paper. Unless you're driving. If you're driving, save it for later. But right now take a pen and paper and just write down these. I don't know, I think it's about 10 things that you can do and really up your chances for getting a loan. Okay, so let's start at the top. If you're in business and you've only been in business for a short while and you don't have a good five, six, seven year history with millions of dollars in cash flow flowing through your accounts positively and your cash balances increase, and in other words, if you're not in a situation where you actually don't need the money, a bank is going to always require a good credit score from you because they're going to require a personal guarantee. So what you want to do is look up online and this changes a lot so I'll have you look it up online, know your credit score and know your credit how that's going to, what the banks are going to do when they see that credit score. And it varies. So what you want to do, what, here's what I would do. I would go get my credit score and then I would go into chat or online, anywhere else you like to go and say, hey, what will the banks lend on a personal guarantee? If my credit score is this, see what it says and you'll know then at that point in time what they're looking at. And it depends on the economy, it depends on all sorts of things. So have a good credit score. The second is you're going to have a much more likely chance of getting a loan. If you have assets in your business or assets personally, but mostly in your business, you really want it to stay focused on the assets in your business. So if you have camera equipment or you have construction trucks or you have. Even if you have accounts receivable, if you have people who owe you money, right, that counts as an asset because those people owe you money. So the more of those you have, the better off you are. Furniture, equipment, buildings, that kind of stuff, more that you got, better off you're going to be. Now if you have loans up against all that, it's not going to count. But if you have some that you don't have loans supporting, like there are no mortgages or car payments or whatever it might be, then that's going to be stuff they're going to look at and go, okay, cool, there's some assets here. Now the next thing that so many people miss is you need to have a forecast, you need to lay out for them. Here is what I'm going to do with your money. Here is how long it's going to take me to pay you back. And here is why this is really good for you. And the best story there is growth, right? I need your money. And the short version of this is I need in there, I said I need, I would like your money so that I can cover a short term cash shortfall while I grow my business. That is exactly what banks are looking for, right? They want to give you money so that you can pay them back more money than they give you and know that you're growing your business, you'll like them and the next time you need money, you'll come to them again because they make interest on that money. Okay? So that's really pretty straightforward. Go in there, know exactly how much you need, exactly what you're going to use it for and exactly how long you need it and when you can pay them back. Okay, Big, big deal. Along with that, what you want to be able to show in that low forecast is that the money that I'm going to make every month will cover both my expenses and what I need to have to pay you back. Okay, sure. I may go without net profit for a couple of months, but I don't care because I'm growing the business. So it's intentional. All right, so you need to show them that you know what you're going to do with it, how long you need it, why you need it, that it's for growth or to acquire another company, which is just a different kind of growth, and you need to be able to show them you can pay it back. Pretty basic stuff, Right. Other thing I would say is if you have a local bank branch, go and meet the bankers there when you don't need money, build relationships with them. The longer they know you, especially if you have your accounts there, the more likely they're going to be to help shepherd your bank loan request through all the things that has to go through at the bank. It's called underwriting, but all the things that has to go through at the bank to get you a yes. Okay, so build that relationship. That's really, really important. Then in. You need to have, and I hate to break this to you, but you need to have bookkeeping and ideally two to three years worth of income statements and balance sheets. Okay? And here's the trick. They're not going to care as much about whether you're profitable on your income statement. Okay. As they are about some math. They're going to do in the background to figure out what your cash flow really is. And the reason they want those financial statements is because they're going to take them and they're going to go off in the back room and say, okay, this much cash is coming into them. This much is getting paid towards expenses. This is how much they have left. Yep. They'll be able to cover what they owe me and what they owe anybody else every month. Okay. So having those financial reports, if you have two, three years, your case just gets stronger and stronger. Some banks will end a little bit off of a year, but not too many. Okay. Then moving on. They want to see a strong revenue stream, right? So they want to see that you've got regular revenue coming in and ideally that it's been growing over time or that it was growing and now it's Stalled, because guess what? That tells a great story. That's. That exactly tells the story you're here for. Hey, I'm stuck at this revenue level until I can invest some money to grow it. And you're, you're making the case. So seeing that regular revenue every month for the 12, 24, 36 months is huge for them, like I said, you are going to have to put a personal guarantee on it. So I've had so many people, so I'm not going to do that. This is my business. Get over it. Unless you're that business that's been there forever and they're actually going to give your business alone without a personal guarantee. Just get over it. 99% of the small businesses out there aren't big enough to get a loan that doesn't require a personal guarantee. So that's just an easy one. And then finally, make sure your reason is really solid, that they know and understand the reason you're in there to borrow the money. Okay? So you can see it's a short checklist. The hardest part, if you don't have the financials, is getting those financials put together. And this goes back to something I tell you all the time, just do it. Just do your bookkeeping because there's so many things you need that for. In the end, that becomes just a push of a button instead of having to go, oh God, I've got to create these things that don't exist, right? So just another, another push to get the bookkeeping done and then finally know exactly what you can do with the money. Know how you're going to spend it, when you're going to spend it, when you can pay it back. It's really that straightforward. The way the little tip I'll put on this is if you were going to lend somebody money, it's the things you would want to know before you lent them the money, right? What are you going to use it for so that you know, it's not, you know, just to create more debt. What are you going to use it for? When are you going to be able to pay me back and will you be able to afford to pay me back? That simple and straightforward. So if you have any questions, be sure and drop them in the comments. Give this a like and a subscribe if it was useful to you. Share it with anybody that might be looking to make a business loan and could kind of use these tips. But stay away from the things that will get you a guaranteed no, and focus on the things that will help you get to. Yes. I hope you have a great week, and we'll see you next time on Cash Flow.