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November 20, 2018

How to Prepare to Borrow from a Bank

2 min read

Topic: Growth Agent Insight Start an Agency Grow an Agency

During a recent Circle of Excellence discussion (our regular informal meeting with high performing partners), we talked about the role of a Chief Financial Officer (CFO) in a growing business. One of the great questions that came out of that discussion was how to prepare to borrow money from a bank.

I’d like to address that question here from the perspective of an active entrepreneur, bank board member as well as the CFO’s expressed perspective.

Essentially, it all comes down to building a relationship.

The smart business person understands that she may need to borrow money to grow the business, smooth cash flow, buy assets, or for some other purpose at some point in the business’s development. It’s very important, regardless of how you feel about debt, to prepare for contingencies.

  1. man outside talking on a cell phoneBorrow money before you need it. Wherever you have your business banking, meet with a loan officer. Take them to lunch and talk about your business and your plans. Get to know the kinds of business, and the kinds of loans the bank likes to make. Understand their perspective and what they look for.
    What you’ll hear in that conversation is that they like to loan money to people who are well organized, know how to run their business and have a plan and solid ability to pay back the money. For new business people, the most important thing may be an excellent credit score.
  2. If you don’t have a good set of financial statements prepared for your business and a comprehensive and a well-prepared personal financial statement, get your CPA to assist you. What is on there is important, but so is the presentation of the information. Ask your new banker friend what he thinks of your business and your financials. Are there things you could do to improve them? Are there areas he thinks he could assist that might speed your growth or boost your cash flow?
  3. Even if you don’t need money now, consider asking for a small line of credit. These are profitable business for a bank and offer an excellent opportunity for you to begin borrowing and repaying financing. The point is to get started well in advance of when you might really need to borrow. Perhaps you never will, but the wise business person is prepared.

Remember that your banker is a business person too who needs to make loans to generate income, which means a genuine interest in loaning you money. 

If you haven’t already established a lending relationship for your business, resolve to do that during the first quarter of the year. From a financial statement perspective, it’s a logical time to do it, and it is a great idea to go into the new year with new capabilities!

Tony Caldwell is a modern “renaissance man,” who is not only immensely successful in the field of insurance, but is also a writer, children’s advocate, mentor and even a licensed pilot.

Always keen on helping others make their dreams come true, Tony and his team have helped independent agents grow into more than 250 independent agencies. This has made OAA the number one ranked Strategic Master Agency of SIAA for the last 5 years, and one of Oklahoma's 25 Best Companies to Work for.

Tony loves to share his knowledge, insight and wisdom through his bestselling books as well as in free mediums including podcasts and blogs.

Tony and his family are members of Crossings Community Church, and he is very active in community initiatives: he’s chairman of It’s My Community Initiative, Inc., a nonprofit working with disadvantaged people in Oklahoma City; and chairman of the Oklahoma Board of Juvenile Affairs., and he has served through many other organizations including the Salvation Army, Last Frontier Council of the Boy Scouts of America, and the Rotary Club.

In his spare time, Tony enjoys time with his family. He’s also an active outdoorsman and instrument-rated commercial pilot.