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What You Should Know Before Applying for a Business Loan

Be prepared before you seek assistance for your business

By Deborah Jeanne Sergeant

Interest rates are down compared with before the pandemic. It may be a good time for your business to seek a loan. Area banking leaders offered their tips about how to prepare for a loan application.

Tips from Timothy Brown, business banking leader for CNY and Rochester market, Key Bank

• “Especially this time, they have to come prepared. We’d want to see financial information. We all know that the pandemic hurt a lot of businesses, but some have flourished. We want to know what they were doing before and what happened during the pandemic. Did they get PPE loans? Was that loan fully or partially forgiven? Did you receive the SBA economic injury disaster loan or any other loan? If your company did suffer during the pandemic, what did you do as a business owner to adapt to what was going on? We also want to see since things are starting to open up, has your business started to recover? What changes did you make? Will they be long lasting?

• “We also have concern about their employees. How did they fare through this? Did you have to adjust your workforce? Do your employees need assistance? Do they need to talk with someone? This is important for them. It’s important to know there’s someone who can help their employees.

• “We want to see internal financial statements for first quarter 2020 and first quarter 2021. Did you in fact recover and where were you prior to that? If there were some expenses because of the pandemic that happened, we’d like documentation of that.

• “Be open and honest with your banker. We are there to help and for every question we ask, there’s a reason behind it. Let us know if you personally had to inject cash or cut your income level. We need to know these things. Have you approached your vendors and talked with them with how your repayment is going? Are you being paid by your clients in a timely fashion?

• “Depending on the size of the business and the sophistication of the business, we’d like to see monthly or quarterly budgets for the rest of 2021 with some assumptions addressing their finances and how they’re turning things around. It’s better to provide with more information than not enough.”

Tips from Tom Roman, senior commercial banking relationship manager, NBT Bank

• “The process of applying for a commercial loan is as unique as the business or organization applying. For newer businesses, we encourage applicants to research the many resources available through the Small Business Administration’s website at These tools offer guidance and a great starting point for what to expect when you are preparing for a business loan application. NBT Bank also works closely with, and refers many small business customers to, many local economic development corporations. Even before an individual goes to a bank to discuss a request for startup financing, these offices can offer guidance on alternative financing sources, grant funding, site selection and drafting business start-up plans. Because new businesses don’t have the benefit of actual financial performance to demonstrate the potential for future success, it is important to have a business plan to guide conversations with bankers.

• “For established businesses, we generally look at the most recent three to five years of financial results, while also focusing on how the loan will serve to enhance or stabilize the performance of the business going forward.

• “Whether you are a new or established business, having a good relationship with your banker as early on as possible will help support your goals and ensure a smoother process. And be prepared to spend time with the bank, so that they can really understand your business. This allows them to provide the best recommendations and products to help the business be successful in the long-term. Ideally, your lender will take a proactive approach that addresses the unique financing needs of your business not only today, but also into the future.”

Tips from Nick Tryniski, vice president and credit manager for Pathfinder Bank, Syracuse

• “Review personal credit history. As part of the underwriting process, banks will obtain a credit report on owners of the business. The information reported on an individual’s credit report is one indicator of a potential borrower’s credit worthiness. It is important to understand what is on your credit report as this can affect a small business’ ability to borrower through traditional financing options. Make sure that all accounts are current. It is also important to verify that the information reported on your credit report is accurate. If inaccuracies are found it is important to correct these to prevent any delays in the underwriting process.

• “Compile all necessary information. In order to prevent delays in the review of your request it is important to provide your bank with all required information, including a business plan, projections, business financial information and personal financial information.

• “If the business is a startup, it is important to develop a business plan. This will allow you the opportunity to show the bank how the business will be able to repay the loan requested. The business plan should include financial projections, information on the owners and their ability to operate the business, market analysis, operation plan and financial plan.

The Oswego Small Business    Development Center can assist with this.

• “Projections including critical assumptions to show the bank that the business will generate enough cash flow to repay the loan. The Oswego Small Business Development Center can assist with this as well.

• “Have two to three years of federal income tax returns or independently prepared financial statements for businesses that you own. This will help the lender understand the present condition of your companies.

• “Have two to three years of personal federal tax returns ready to provide to the lender. This will help the lender understand the support that is provided from any guarantors of the loan. Banks will also require that you provide a Personal Financial Statement. This is a list of all assets and liabilities you have personally.

• “Research financing options. Under traditional lending programs banks will require borrowers to contribute equity (20% to 25% of purchase price) when purchasing a business, real estate or equipment. There are alternative loan programs that borrowers should consider such as the SBA 504 program. This program allows borrower to put down less money (10% to 20 % of purchase price) for eligible transactions. The 504 program consists of 50% bank loan, 40% SBA loan and 10% equity. Borrowers will typically get a lower fixed rate on the SBA portion of the loan, which makes this program even more attractive.”