Understanding the Loan Approval Process

When you borrow money, you enter into a contractual obligation. Many of the major commercial lenders have streamlined their loan approval process to provide faster service for their clients. In order to help speed the process, you must provide your financial institution with sufficient information to prepare and assess your credit application in detail.

There are essentially three steps to the loan approval process:

Step 1: The Interview

When applying for a business loan, the first step - the initial presentation to your account manager at the financial institution - is crucial. Make an appointment so that your account manager is ready to see you. Make sure you bring your business plan, and be prepared to discuss it in detail. Make sure you understand and can explain the financial statements and projections. For complete information on preparing a business plan, refer to ED&T's Starting a Small Business.

Be prepared to explain:

• How much money you need and how you plan to spend it
• How the money will help your business grow and prosper
• How much money you can afford to pay back on a regular basis (based on your cash flow projections)
• What you plan to use as collateral, including personal guarantees you are willing to make
• How you are prepared for a worst case scenario (for example, sales volumes do not materialize or clients delay payments)

In the interview, your account manager will be assessing the elements of your business plan and your management strengths and weaknesses, including the following:

• Your level of expertise and experience
• Your professionalism and presentation skills
• Your level of commitment and enthusiasm
• To create a good impression, you should be well-prepared, enthusiastic, and professional.