How Best to Approach Your Bank for Start-Up Capital

by Redeeming Riches on August 31, 2012

Approaching a bank for startup capital can be a very intimidating process. Banks have become very cautious about lending money, and an aspiring business owner will need to know how to approach the bank in a manner that will make them feel comfortable about granting a loan.

There are three things that you should do before approaching a bank for startup capital finance. Using these three tools can greatly increase your chance of securing a loan.

1. Attend Business Workshops – Most community and state colleges offer business workshops that are geared towards people that want to start a business in their community. These workshops, often sponsored by local business organizations or government entities, are a great way to learn about business practices in your area. The learning experience will provide you with the knowledge you need to create a business plan and answer all the tough questions the bank will ask during the initial interview you will have with them when you apply.

2. Find A SBA Mentor – The Small Business Administration has a mentoring program that can help new business startups prepare for opening a business. In most cases, contacting the SBA or your local Chamber of Commerce will connect you with this free service.

3. Create A Professional Business Plan – The main thing that you need before you walk into the bank is a professionally written business plan. You want to show the bank that you have every last detail researched, and a plan of action for each of those details, including your in depth financial analysis. You want to show to them that you understand this business, and that you are not a risk.

Once you have accomplished these tasks, you will be ready to approach the bank. Make sure you bring all the paperwork that may be requested of you, including bank statements, asset lists, and business related items.

You will also need to prove to the bank what you are putting at risk for the start of this business. They are not going to give you a loan just because you have a dream. They want to see how much cash you will be investing, how much equipment or product you already have, and how much more you are willing to contribute to make the business a success.  To help increase your cash, you could even consider cash loans if necessary.

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