will be repaid with profits over a select period of time - usually not more than seven years, although
some SBA financing options may provide a longer loan maturity. If seeking growth capital, you will
be expected to show how the money will be used to increase profits sufficiently to repay the loan in
the agreed-upon time frame.
While the process can be time consuming and even frustrating, your chances of being successful are
greatly increased, if you are informed and well prepared. Be well informed by doing your homework
to understand the borrowing process. Be prepared by putting together a meaningful loan package
that addresses the most common questions a lender will ask. Questions to be prepared for include:
What is the specific purpose of the loan? - How much of a loan are you requesting? When and how
long will you need the funds? How will the loan be repaid? What collateral can be used to secure the
loan? And, will you provide a personal guaranty?
Answers to these questions, as well as supporting documentation are essential to the lending deci-
sion and will shape your lender’s response. Let’s look at each of these items.
How much of a loan do you need to support specific business needs? This is the question you should
address, NOT, how much can I borrow? Clearly defined business needs should be tightly aligned with
the amount of financing you are requesting. How accurately and convincingly you speak to this will
often determine your lender’s interest in your request and set the tone for further dialog. Remember,
100% financing is not an option….. And, never ask to borrow money you don’t need.
Loan Maturity & Terms
A lender will want to know how long you need the borrowed funds.
The reality, however, for working capital or asset-based loans is that the loan maturity will be tied
to the amount of time needed to satisfy specific cash flow issues or the life expectancy of the asset
being purchased.
For instance, working capital loans or lines of credit would have short-term maturities, typically under
one year. An asset-based or equipment loan, perhaps to purchase a business vehicle or machinery,
could have a maturity tied to the lifecycle of the asset. This type of loan, typically would have a ma-
turity of three to seven years. The key exception would be SBA guaranteed loans. Such loans could
have maturities greater than ten years.
Repayment
Loan repayment is a big deal to a lender. You should give serious and careful consideration to how
your business will repay a requested loan. A lender will examine past and projected financial state-
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