Regional and community banks are quickly becoming the primary source of loans for small-business owners. With that in mind, we asked Jonathan F. Dolphin, chief commercial lender for 21st Century Bank, for three things that impress him in a loan applicant--and three things that turn him off.
Looking around for investors? Here are some tips to keep in mind:
Do get publicity for your business in local publications or business journals. Investors will be much more impressed if they hear of you before you ever contact them.
Do try to build up a personal relationship with potential investors before you ask them for money.
Do ask your accountant or attorney for people who might want to invest.
Do find out if your prospects have invested in other businesses and talk to those people about their experiences.
Do persuade investors that others are very close to signing on so you don't find yourself in the position where no one wants to take the first plunge.
Don't make the future of your business sound too rosy; investors will assume you're being naive.
Don't be afraid you're too small: About two-thirds of the companies getting angel funding are worth less than $1 million when they receive the investment.
Don't hide the size of your own investment from potential investors.
Don't forget to ask employees if they'd like to invest.
Don't assume that an investor will necessarily be an advisor or that you'll want him to be an advisor; they're two different roles. -Tom Nawrocki
- Come to the meeting equipped with a well-prepared financing package. Napkin notes do not impress lenders.
- Be able to explain the historical operating numbers and assumptions made in your projection. The more factually you can speak about your business, the more confidence the lender will have.
- Pay down your credit balances prior to your meeting with the bank. If you cannot handle your own personal finances, he'll question whether you can run a company.
- Don't base profitability on increasing sales from the previous year in the current economic environment. Show profitability by predicting similar sales levels and reducing overhead if needed.
- Don't give the banker only half of the story. Be honest. If you're upfront with your banker, your odds of receiving the money are better.
- Don't show up at his office with a brand new Hummer H2 and claim you need to borrow money. This just shows you don't have a firm grip on reality.