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Traditionally bankers look at what are called the three c's: character, credit and collateral. Character means more than not having a criminal record. It means that the banker feels confident that you are not going to suddenly disappear for parts unknown if the business runs into trouble. Specifically bankers like to see ties to the community such as long residence, family ties, and home ownership. A clean credit history is important. A couple late credit card payments shouldn't be a factor, but missing mortgage payments for three months in a row will require a good explanation.

Bankers like good character and good credit, but they live for solid collateral. Equipment, buildings and trucks--that's the kind of stuff that bankers really like for collateral--solid value and likely to be worth a lot even if the business goes bust. Inventory, raw material and goods are second choices for collateral--they will lose their value more quickly than fixed assets but still be worth something.

The criteria for business loans varies much more widely than for consumer loans and often varies quite a bit from one banker to the next at even the same bank! However here are some rules of thumbs to give you an idea of your chances of getting a loan.

Getting a loan for a new business is tough
Fixed assets such as machinery or buildings can almost always be financed
Current assets such as inventory or goods in process increase your loan chances
2+ years of profitable operation greatly increases your loan chances
The larger the owner's investment in the business the better your chances of getting a loan
Loans to small corporations will often have to be personally guaranteed by a shareholder
It is difficult to get loans to offset operating losses
It is usually possible to get a loan to modestly expand a profitable business
How to get the bank's money, even when the bank says `no!`
Banks have much more lenient standards for lending to consumers than to businesses. So what you can do is borrow the money from the bank as a consumer and then turn around and personally invest the funds in your business. Just make sure that you never lie how about you are going to use the proceeds on a loan application. For example you could apply for a home equity loan to tap any available equity in your house. Then take the funds and invest them in your business. The bank feels safer because their statistics show that home equity loans or much more likely to be repaid than loans for brand new businesses. No equity in your home? Maybe you can get a car loan?

Don't just show up in person--first make an appointment by phone. Ask the receptionist in the bank or the loan department for the name of the appropriate person who would handle your loan request. Of course it would be better, but not necessary, to get a referral from a friend or advisor such as your lawyer or accountant. When you get the name of the appropriate loan officer simply ask for an appointment. Don't offer any more details over the phone, unless the loan officer requests them. The more details you offer over the phone, the greater the chances you won't get the appointment at all. Sound confident. Sound matter of fact. Sound like you don't even need the money... that's the kind of person that loan officers like to lend to.

For More information on Business Plans you may want to get a copy of the book "Adams Streetwise Business Plans" (430 pages, $17.95, Adams Media Corporation). This book includes complete sample business plans; detailed step by step instructions for writing a business plan; suggested text for each step of the business plan; instructions and worksheets for creating complete financials.

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