Applying for a business
loan can be like kayaking through river rapids; you would be foolish to do
either without adequate preparation and the watchful eye of
an experienced guide.
Although Dan Waldeck has
never pulled someone out of
churning waters, he has led
executives through the loan
application process as senior
vice president and relationship
manager at National City
Commercial Banking. And he
says that the most successful
applicants are those who practice due diligence before submitting their loan for approval.
That preparation can take
many forms, but Waldeck says
that the best way to prepare is
to devise a state-of-the-company
report.
“What I’ve seen that has
been very successful is when
executives will sit down and
prepare anywhere from two
pages to 25 pages — depending on what’s going on with
the business — that survey not
just the financial performance
but what they’re projecting for
the future and what are the
challenges,” he says.
That report not only gives loan
officers helpful background on
your company, it also helps you
by shedding light on the merit of
a given project.
After taking a disciplined look
at your current situation, for
example, you may have to modify your strategic plan before
seeking a loan. Or you may have
to scrap your plans entirely if an
opportunity isn’t as beneficial as
you had first hoped.
When conducting your analyses, you should also look at
the state of your industry and
the economy in general.
Waldeck points to the recent
talks of recession as an example: “Right now, we’re in a
declining, short-term interest
rate environment. It may not
be a positive thing that economic indicators have declined,
but it does mean that borrowing rates have gone down in
the last six months.”
Whatever the state of your
company, industry or the economy, Waldeck says that you
shouldn’t feel alone when conducting your initial analysis. If
you’re struggling, have questions or simply need help getting started, don’t be afraid to
approach your loan officer.
“A banker that adds value
will assist through the process,”
he says. “We’re just not asking
you to come in and do an
information dump. We want you to feel like we can help
you. If you want to contact us
even earlier in the process and
say, ‘Well, this is just what I’m
kind of thinking. What direction should I go with this as I
do a business plan?’ That’s
something that we can help
with.”
Waldeck doesn’t just suggest
approaching a loan officer in
the preparation phase, but he
actually encourages it. Bankers
can provide you with guidelines to help steer your planning, and they can alert you of
regulations that could affect
the status of your impending
loan application. But however
you use them, it’s important
that you open up some channel of communication with a
loan officer before you submit
your application.
“Communication is so important,” Waldeck says. “We find
that the very successful business leaders are the ones that
are communicating with us in
advance. They should not feel
shy about telling us about
good news or bad. The main
thing is to keep the communication channels open. That
allows us to add more value.”
Throughout these initial
steps as well as the application
process itself, hold your loan
officer accountable. Waldeck
says that one of the best ways
to ensure your loan is approved
is to treat your bankers as
partners.
“A banker that is truly worth
his or her salt would be somebody that considers it a partnership and walks the business
leader though the process,”
Waldeck says. “Make sure that
he or she fully explains the
process.”
HOW TO REACH: National City Commercial Banking, (216) 222-9020 or
www.nationalcity.com/commercial-banking/pages/home.asp
What is your banker looking for?
All the preparation in the
world won’t do you any good if
you don’t know what a loan officer is specifically looking for.
While the details may change
based on your banker, your
company and your desired loan,
there are four general things
that can make or break any
application, says Dan Waldeck,
senior vice president and relationship manager at National
City Commercial Banking.
- Management “When I’m
looking at a business loan
request, it always starts with
management — the individuals
that you’re dealing with from a
character standpoint. What type
of command do they have on the
business that they’re talking
about and the knowledge of the
marketplace and so forth?” - Business model. “A banker
that is adding value and that
would be a good partner for
business leaders is one that really tries to understand the business model for that leader. Is it a
compelling business? Does it
appear to be sustainable on an
ongoing basis? That’s important.” - Cash flow. “If it’s a company that has existed historically,
we look at historic cash flow. If
we added, say, a million-dollar
term loan, can the company
afford this on a historical
basis?” - Collateral. “Falling in
behind (cash flow) would be,
what type of collateral is there to
support it?”