Here’s What Our Michigan Bank Wants You to Know…
“Bootstrapping” your business by relying on personal funds or cash flow to fuel your growth is a risky strategy. A business loan is a practical solution when you need funds for:
- additional materials or equipment
- new marketing campaigns
- more staff
- expanding your facility
- meeting day-to-day expenses (working capital)
Most Michigan banks offer a variety of business loans to help you achieve your growth goals. Each bank could have slightly different information needs depending on the type of loan you’re requesting. In general, you’ll need the following documents when applying for financing.
A Business Plan
Your business plan is a roadmap that outlines the path you’ll take to reach your objectives. Lenders review your plan to make sure you understand and are prepared for any opportunities and challenges. More specifically, they are interested in your assessment of the following:
- competitors and market conditions
- your point of differentiation
- your experience with operating and managing a business
- your sales and marketing strategies
Be sure to include your financial statements (profit/loss, cash flow, and balance sheet), your growth projections, and an explanation of how you plan to use the loan funds.
Banks use credit report information to review your company’s past payment history and get a third party’s perspective about your credit worthiness. Credit bureaus including (but not limited to) Dun & Bradstreet, Experian, and FICO provide credit scores and financial stress/failure metrics. Each bureau calculates credit scores slightly differently, and their reports occasionally have errors, so it's a good idea to review your report before sharing it with the bank.
Some banks will ask you to also submit a personal credit report from TransUnion, Experian, or Equifax.
Although you shared your financial statements, your tax returns help the bank verify your company revenues or losses. Banks typically need your business (and sometimes your personal) returns for the prior two - three years.
Your business bank statements are another source of information that provides lenders with useful insights. They use your statements to confirm the following:
- your business name
- your company’s cash flow, reflected in daily deposits and recurring payments
- the financial health of your business as shown in your statements over time (usually 3 to 12 months)
Banks are interested in knowing about the business (or personal) property you would be willing to promise to secure financing. If your company is unable to repay the loan, you’ve given the bank permission to sell the collateral as a form of repayment.
When identifying collateral for the bank, you’ll need to prove ownership and show appropriate titles.
Details you can share with the bank to help them understand your business and current financial situation might include:
- articles of incorporation
- business licenses/registrations
- leases for equipment or commercial property
- franchise paperwork
- arrangements with third parties including suppliers or customers
- accounts receivable and payables reports
When you’re focused on growing your business, you want to find a bank that understands your business and responds quickly to address your financial needs. Level One Bank earned its ranking as one of the best banks in Michigan by supporting business growth. Our experienced bankers put their entrepreneurial spirit to work crafting financing plans that work for you. Contact us today for more information about partnering with Level One Bank.
“The biggest sources of opportunity are collaboration and partnership.” - Mark Parker, CEO, NIKE Inc.