How To: Obtain Financing for Your Business

Northeast Ohio entrepreneurs are constantly conceiving new business ideas, but new opportunities often require financing to execute. The solution could be as close as your local bank branch, says Brian A. Fisher, senior vice president, business banking sales manager at FirstMerit Bank.

“A good business banker, including those at FirstMerit, will talk through your ideas and introduce you to local accountants, attorneys and small-business development officers. We’ll direct you in areas like marketing research and make contacts to help you through the process. All you need to do is to come in with a solid concept,” he says.

And good financial records. Though the criteria for a business loan is different for an existing business than a new business, careful preparation is the key to a successful visit with your bank.

Businesses in operation for at least three years that are interested in purchasing real estate or equipment or need a working capital line of credit should bring three years of consolidated financial statements or corporate tax returns, as well as two years of personal returns for each individual who represents a minimum of 20 percent ownership in the business.

Those stakeholders should have a good handle on their personal financial situation with details of their personal assets and liabilities and be familiar with the debt noted on their credit report. (The business owners will probably be asked for a personal guarantee on the loan.)

A copy of the articles of incorporation, operating or partnership agreement should also be readily available. Bring insurance information, including the agent’s name, address and phone number. Having this information prepared will likely save you a lot of time during the loan process.

For startups or companies that have only been in business a short time, the materials differ slightly.

Banks want a business plan. And though putting together a business plan may be frightening for those who are inexperienced, help is readily available through small-business development centers, FirstMerit Bank business bankers and the U.S. Small Business Administration (www.sba.gov), Fisher says.

Plan to provide three years of projections, which Fisher says should be created by a team of the business’ trusted advisers, including its banker, accountant and attorney. The principals should provide a résumé and specifics regarding the source of the equity the owners will be investing.

Fisher stresses the importance of talking with a business banker to determine what type of financing is right for your specific business needs.

Obtaining a secured or unsecured loan may be excessive for some companies, and they may want to consider a business or personal equity line of credit or a business credit card instead.

“The last thing [your banker] wants to do is put you in a position to fail. It is our job to help point you in the right direction."