Be prepared when seeking a loan

Small business owners don”™t need to be afraid to walk into a bank and ask for a loan.

The regional and community banks operating in Westchester County are always looking to develop new small business relationships, because a bank that sits on its money will not survive for long. Now is the time to look forward with your banker to find new opportunities for your business as the economy shows signs of growth.

We have a saying in our business-banking department that goes something like this, “Every one of our bank”™s biggest customers was once a start-up.” Small business customers are essential to the future of banks in Westchester County.

However, just because banks are eager to add small businesses to their client roles, does not mean every loan application will be approved. The bank”™s responsibility is to extend loans to credit-worthy borrowers.

Here are a few things business owners can do to be more prepared before walking into a local bank for a loan.

Polish Your Personal Credit: The personal credit score of the business owner can be a big factor in the underwriting process. Make sure you pay all of your personal bills on time and check your credit reports for inaccurate information. Under federal law, you are entitled to one free credit report a year from each of the three major credit reporting agencies and can order them at AnnualCreditReport.com.

Understand the credit scoring process. Having too much personal debt, relative to your total credit, is one thing that can drag down your credit score. And that credit score could adversely impact your business loan application. A sudden drop in your personal credit score could also prompt your banker to raise rates on a business line of credit. Maintaining a good personal credit rating is one of the most important things a small business owner can do to improve the borrowing ability of his or her business.

Understand Relationship Banking: When you bundle your business together and bring it all to the same bank, you become a more valuable customer. This means you can get better terms and conditions on bank products, such as a lower line of credit annual fee. This is the same concept as getting better insurance premiums by taking multiple policies from the same company.

Even though you are approaching the bank for your small business, your personal business also matters. When you extend your business relationship with the bank, to also include personal deposit and loan accounts, you become a more valuable customer to the bank and can ultimately benefit through lower fees and better loan terms.

Leverage Your Advisers: Here”™s another inside tip from the banker”™s office: Your choice of professional adviser matters. When you walk in the door carrying the advice of an experienced business attorney and certified public accountant, the bank”™s level of confidence rises.

Utilize the services of small business advisers, such as your chamber of commerce or SCORE chapter. A bank may look favorably on the fact a small business owner has received guidance from an experienced business counselor. Also, consider your bank”™s branch manager or small business relationship manager as an additional counselor. They understand the local marketplace and have seen how other small business owners solve certain problems.

Walk Tall: Small business is the backbone of the nation”™s economy, that”™s not a cliché, it”™s a fact. Small business has historically been responsible for much of the job growth in the U.S. Be proud of what you do. Small businesses are like fingerprints ”“ no two of them are alike. Only you can tell the story of your business, so tell it proudly.

Explain your business to the bank, particularly if you work in an industry that has been adversely affected by the economic conditions. Be prepared to discuss your year-end and interim financial statements and your future plans for success.

Do not walk in with overestimated sales projections or underestimated expense projections. Do your homework and keep your business plan updated to the changing economic climate.

Banks across Westchester are actively making new small business loans and renewing or increasing lines of credit every business day. The credit window remains open. If you are well prepared, don”™t be afraid to approach that window.

Marjorie Lang is administrative vice president and regional business banking manager with M&T Bank. She can be reached at mlang@mandtbank.