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Applying for a first business loan is an important milestone for small business owners. A loan can provide the capital needed to expand operations, buy new equipment, enter new markets, or manage cash flow.

But applying for a business loan, especially for those new to the process, can be intimidating. And no step in the process can make a business owner more anxious than the initial business loan meeting with the bank.

So, how should you prepare for the business loan meeting? It’s a question the commercial lending team at The Grant County Bank hears often. And while they’re happy to provide answers, they’re also quick to point out that a business loan meeting is nothing to fear.

Instead, this meeting is an opportunity for the bank to get to know you and learn more about your business, so they can begin determining the loan product and terms that best fit your situation.  

So, whether you own a business or you’re thinking of starting your own business, preparing for a business loan meeting is likely less difficult than you think.

Consider the goal of the business loan meeting

A great place for a business owner to start when planning for a loan meeting is to put the conversation in the proper perspective and go in with realistic expectations.

For instance, a common misconception is that, during the meeting, the lender interrogates the owner about their business and why they need a loan. The reality, however, is far less menacing.

Instead, during the meeting, the lender will want to focus on understanding your business needs. The lender won’t attempt to trip you up or shoot holes in your business model. Instead, their focus will be on gathering information, so they can work with you to explore the best loan options for your situation.

And while you’ll need to gather and share information about your business and its financial health, this information will help the bank get a better understanding of your needs—not so they can put up barriers or intimidate you.

How to prepare for the meeting

Before letting yourself feel overwhelmed by having to gather information for the meeting, pick up the phone or shoot a quick email to your contact at the bank to ask what you’ll need to bring. Once you know—and it might be less than you think—you can focus on gathering only what’s required for the meeting.

While situations differ, common documents requested at a business loan meeting include:

• Your most recent financial statements
• Your personal and business tax returns
• Balance sheets and income statements
• Your business plan

Not every business will have a business plan, and one isn’t necessarily needed for the meeting or to apply for a loan. But having a business plan can help speed up the loan review process and give the lender valuable insights into your business, your customers, and your future plans.

One of the most important variables in determining what information you’ll need to provide at the meeting will be whether the loan is for a new or established business.

When applying for a loan, a new business will need to rely on projections (income, expenses, profit). Established businesses, meanwhile, will have historical financial data that will provide a prospective picture of the business’ future trajectory and financial viability.

What the lender is looking to get from the meeting

In addition to knowing the information you’ll be asked to bring to the meeting, you’ll also want to know the types of questions the lender is likely to ask during the conversation. These will include questions around:

• Why your business exists
• Your ownership structure and leadership team
• Your revenue and expenses
• The business purpose for the loan
• Repayment plans
• Collateral you can use to secure the loan

In thinking about what the lender might want to explore during the meeting, it’s helpful for the business owner to understand the Five C’s of credit. They inform the lender’s decisions about approving the loan and the terms to be offered. The Five C’s include:

1. Character – Your trustworthiness and reputation, as evidenced by factors such as your personal and business credit scores and your record in business
2. Capacity – Your ability to repay the loan based on your cash flow, profitability, and your debt-to-income ratio.
3. Capital – The money you have personally invested, which demonstrates your commitment to and confidence in the business.
4. Collateral – The assets you have that can act as a secondary repayment source. Property, equipment, and inventory are all examples of collateral.
5. Conditions – How the loan will be used and the external economic factors that could affect your ability to repay it.

What happens after the meeting

The meeting is an important step in the process for getting a business loan, but it’s not the only step.

After the meeting, the application and underwriting steps can begin in earnest, and the bank will then carefully review the information you provide. This might include information you were asked to provide after the initial meeting.

In addition to potentially asking you to share more information, the bank should regularly communicate with you to provide updates as your loan application moves forward.

This communication is helpful for the business owner, but it’s also a telltale sign of how the bank treats its customers. If the bank is transparent and responsive during the loan application process, you can realistically expect they’re likely to be great to deal with once they give you the business loan.

Why trust a community bank when you need a business loan

While business owners have multiple options for seeking financing, working with a community bank like The Grant County Bank offers numerous advantages.

A community bank will have intimate knowledge of the area where your business is based and of the local economy. What’s more, because the bank is based in the local community, loan approval decisions are made at the local level.

Community banks can also be more flexible and creative in finding ways to provide businesses with the funds they need.

And customer service is another area where community banks shine. Because they’re smaller than a large national bank, they can serve you on a more personalized level. For instance, you may be able to talk to the same person every time you contact the bank.

Taken together, these advantages underscore why a business should stay local when seeking a business loan.

Remember, the loan application process is a dialogue

While the bank will have the ultimate decision on your loan, you can also play an active role in the process. That includes during the business loan meeting.

The meeting is a dialogue—not an interrogation—and you should feel free to ask questions. The bank is used to fielding questions during loan meetings, and no question will be too small or too insignificant. If it’s important to you, don’t hesitate to speak up.

And once the meeting is over, if you have questions, whether it’s about something you neglected to ask during the meeting or about the status of your loan, you should be comfortable in following up with the bank’s commercial lenders.

Get the money you need for your business

When you know what to expect during the business loan meeting, you can have a smoother, less-stressful conversation.

And, again, remember, the fate of your loan won’t be determined based solely on the meeting. The meeting is simply about helping the lender understand your business and your needs—and about you, in turn, understanding the loan process.  

If you need a loan for your business, take the first step by contacting the commercial lenders at your local The Grant County Bank branch. They’ll be happy to guide and support you through the loan application process and make the experience as painless as possible.