As a small business owner there are times when you will need a loan to keep the business going. Some owners will plan and consider applying for a loan when they really don’t need it immediately. Others will wait until the very last minute, and then they are turned down with no other place to go.
But becoming bankable will take a while even a few years. Here is why I say that:
- Of course, you realize that banks like to see a business that is profitable and being well run. Having your finances in order, and taxes paid and current, is the best way to demonstrate that you are running a well-managed business.
- Owners who want financing yet show very little revenue, a net loss, or have been delinquent in filing taxes perhaps for years, will be turned away.
- So, what will make you bankable? You should have at least three years of positive financial information on hand. Often, business owners will try to minimize revenue as a tax planning device to reduce profits, but this strategy can work against you when you seek outside financing.
- Raise both your personal and corporate credit score by reducing credit balances, paying all debt on time, and avoid applying for new lines of credit during the preparation period.
This process can take several years; therefore, it is important to get sound advice from an accountant and a business banker early and often. The path may be difficult, but it will soon lead down to the right one.