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Looking for Financing? 5 Ways to Make Your Business More Attractive to Lenders

By Citizens Bank Staff

The time comes for most businesses when outside funding makes sense to meet obligations, support growth, or seize opportunities. In the 2019 Citizens Bank Women-Owned Businesses survey, the fastest-growing women-led businesses were 60% more likely than others to have financing in place. The survey also revealed that 1 in 5 women don't apply for funding due to fear of being turned down.

Financing is a possibility for many businesses, and preparation can increase your chances of getting the funding you need. Use the steps below to guide your process.

1. Check your credit profile

Lenders will closely examine your business finances and credit history, so knowing where you stand before seeking financing allows you time to make improvements. Request a copy of your business credit report from the major reporting bureaus: Dun & Bradstreet, Experian®, and Equifax®. If you don’t have a strong score now (generally, 80 and higher is considered good), take steps to improve it. Use this checklist to get started.

2. Develop a business banking relationship

A business banker may be your entry point to apply for financing. If it's been some time since you’ve spoken with your banker, set up an appointment. The better your banking partner knows you and your business, the more equipped they'll be to recommend the best financing tool for your needs. Even if you’re not looking for financing now, checking in with your banker periodically about the state of your business and your goals and challenges can help you anticipate a need for funding down the road.

3. Build your case for financing

Having well thought out, concise answers to the questions any potential lender will ask can help increase your chance for success. Prepare your answers to these standard questions in advance so that you can make a good impression when the time comes:

  • How will you use the funds? Be prepared to explain specifically what your plan is for the money you seek and how it will strengthen your business.
  • How much do you need? Know going in how much money you'll need. Be sure to calculate ancillary costs such as installation or training for new equipment or technology.
  • How will you repay? Work with your accountant or financial advisor to review your current finances and determine how you'll pay off the financing. Building detailed cash flow projections can help with this.
  • What's your timeline? Certain types of financing, such as U.S. Small Business Administration (SBA) loans, can take 60-90 days to close. Other types of funding can be available much more quickly. If timing is a consideration, be sure you're clear on what to expect.

4. Assemble documents

Gather the information and forms that you'll need to apply for financing. These documents will vary depending on the specific type of financing you're applying for, so review the application requirements carefully. Commonly requested documents include:

  • Financial statements, including balance sheets, income statements, and cash flow statements
  • Business and personal tax returns
  • Bank account statements dating back a few months to one year, depending on the lender
  • For SBA loans, legal documents including business licenses and registrations and commercial real estate or equipment leases

Review your financial documents with your accountant or business banker to anticipate questions lenders may have.

5. Commit to good financial habits

The effort you put into preparing for financing can improve your credit profile. Most of these habits will also strengthen your business overall. For example, stepping up your sales efforts so that you can demonstrate healthy revenue is important to lenders, and it's naturally good for business. Likewise, shoring up your collections practices typically improves cash flow, which will also help you make a more compelling case to lenders. Try to maintain these good habits for continued success.

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