Getting commercial financing for your business venture may seem a bit daunting to those who’ve never tread those waters before. In fact, just knowing when to start can be a bit of a question. Do you start early when you’re company is still in startup phase? Wait until your business is established? Do you apply before you need the funds? Or wait until there’s a pressing need?
In truth, finding a lender for your business really comes down to what you need the financing for. For some, this may mean startup costs and getting a location. For others, it could mean adding additional supplies, staff, and equipment; or even expanding into a new building.
Regardless of your reasons, we’ve got a few tips we’d like to offer based on our years of experience working with lenders for our clients.
- Start local. Getting good financing can ultimately come down to relationships. When you’re on the hunt for commercial financing, check out all of the specials and deals with your local banks and credit unions. Often times, they’ll understand your need better than a larger bank. Be sure to find a lender who has an understanding of your industry, too. They’re knowledge will ultimately be beneficial in structuring your financial solution and maximizing the credit available to you.
- Build a report early. Once you’ve found the perfect lender, start talking to them as early as possible. Ideally, months (or even years) before you need their assistance. As we said, having a relationship with your lender will not only help you get better deals, but you’ll also have a much better overall picture of the process.
- Get clarity. This is also known as Business Planning time. In order to get financing for your commercial project, you’re going to need to get clear about your business plan and goals. You’ll need to get very detailed and have a clear vision of how your business is going to succeed and how the loan will help impact that success.
- Know your objectives. You’ll want to write out an objective for your lender to gain financing from them. This helps them gain a better understanding of how you plan to execute your overall business purpose and impact your target market. This usually includes a details about how you plan to run your business, how many people you need to make your plans happen (and whether you need to hire more or not), and how you intend to generate cash flow to pay back the loan
- Economic Cash Flow Assessment. Completing an economic cash flow assessment is crucial to gaining commercial financing. This basically shows your lender why you believe your future business will positively impact the community it’s going to affect. It also shows how you intend to manage money and how you’ll handle things if something was to go wrong.
- Submit a resume. This one may sound a little strange at first, but it makes sense. Giving your lender a history of your employment will help them to better understand how your experiences have brought you to this point and why you’re a good fit for financing the specific business your proposing. By telling your personal work story, you’ll be able to give more perspective to your lending agent.
- Personal finances. When applying for commercial financing, you’ll still need to be prepared to have your personal financial records looked over. You’ll be submitting last year’s taxes, as well as a number of bank statements determined by your commercial lender. Be prepared to have your personal credit score reviewed when applying. If your credit score is less than appealing, consider taking steps to improve your score before applying for your business loan. There are a number of ways to acquire your credit score for free. Your best bet is with AnnualCreditReport.com, which is federally authorized.
- Have a co-signer. If your credit score could use a bump, but you don’t want to wait – consider taking on a business partner to co-sign your commercial loan. Choose wisely, as their credit score needs to be in tip-top shape, too.
- Collateral. When applying, you’ll need to think like a lender. Do you have anything in your name that could be used as collateral for your new loan? This is basically anything that gives your lender assurance you’ll pay back the money. It could be something as simple as jewelry, to a car title, home equity, or even property. But remember, don’t gamble with your collateral unless you’re willing to let it go.
- Apply. Once you have all of the other steps in order, it’s time to officially apply with your bank or credit union. Get in touch with your lender and have them start the process. Because of the all the advanced leg-work you’ve done, applying should be a breeze and the relationship you’ve cultivated could mean a fantastic financing arrangement for you and your business.
Here at Baratto Brothers, we’ve worked with lenders of all shapes and sizes; local and not-so-local. If you’re looking to finance a commercial construction project, feel free to give us a call at 218-692-1070 and we’d be happy to give you suggestions and recommendations. We know how daunting financing a commercial project can be, especially if it’s new to you – but we’re here to help you every step of the way. It’s just one of the ways Baratto Brothers Construction works hard at becoming your Commercial Builder for Life.