Economic times are tough. To be successful in getting a loan, it’s best to do your homework and find out what bankers need to know before you arrive in hat in hand asking for cold, hard cash.

 

Economic times are tough. To be successful in getting a loan, it’s best to do your homework and find out what bankers need to know before you arrive in hat in hand asking for cold, hard cash.

“It’s hard to get both kinds of loans these days,” said Carol Kaplan, senior public relations director of the American Bankers Association, referring to home and business loans. “Many people don’t have enough equity in their homes anymore to refinance or get equity of out them because of the housing crisis, the devaluation of homes.”

So what’s your best strategy? Banks are looking for you to answer these questions before green-lighting a loan for the home or business:

Know your income, said Michael Eisenberg, CPA and personal finance specialist with Michael Eisenberg Financial Advisors of Potomac, Md. “Lenders want to feel comfortable lending money to you. Know where you stand. How is your cash flow? What are your expenses?,” Eisenberg said.
“You need to show the banker that you will be able to pay the money back at the end of the loan period,” added Jonathan Cox, senior manager media relations for the American Institute of CPAs. The same holds true for a home loan. Know what you can afford. Know your credit rating, and have three to five years of financial statements available.

Have a unique approach, said Robert C. Seiwert, senior vice president of American Bankers Association Center for Commercial Lending and Business Banking, Washington, D.C. “Depending on what market you want to serve, the lending institution will look very hard at what level of experience you have in the industry. Is it like other businesses? Do you have a unique approach? It’s a tough time to open a business, but if you have something unique, you can be successful.”

Character counts, added Seiwert. “What do you bring to the table? Your resume should be concise and speak to your experience as it relates to your business venture. Bankers will assess your character first, then look at your business plan.”

Choose the right bank. Not all banks lend to new businesses or are right for a second mortgage. “Find a bank that is SBA (Small Business Association)-approved,” said Seiwert. The same holds true for home loans. “The key ingredient is building trust between the banker and loan applicant,” said Eisenberg. “Start at your local bank where you have a personal contact. Find someone you’re comfortable with and confident in that they will give you good advice. Don’t get discouraged if you get turned down the first time. Try two or three times if necessary.”