Most businesses require outside capital. The question is, what is the best kind to seek? Should it be a loan, small business grant, venture capital, crowdfunding, or an investment from friends and family?
For its latest Case Study feature, Business Report asked three local executives—Nathan Bragaw, assistant professor of management at the LSU E. J. Ourso College of Business; Dan Adler, senior vice president of corporate lending at BancorpSouth; and Will Campbell Jr., director of the Louisiana Small Business Development Center at Southern University—to share some of their best advice for business owners who are considering a business loan.
“From a strategic perspective, you’ll want to consider how a loan fits within your broader objectives,” Bragaw says. “Unlike a line of credit—the better option for managing cash flow in a business—a business loan is usually taken with a specific purpose in mind, such as to initiate a business or to purchase equipment.”
When you go to the bank for a business loan, Adler says you should be fully prepared to share as many details about yourself as you are your business plan.
“Regardless of the size or type of financial institution, your business banker will also want to know a lot about you personally: who you are, how long you’ve been in business, your history of meeting financial obligations and more,” he says. “How a business owner has handled things in the past is generally an indication of how things will be handled as he or she forges ahead.”
Campbell says a good way to prepare for the business loan application process is to focus on the so-called 5 C’s of credit: credit history, capacity, collateral, capital and conditions.
“The more thorough you can be in providing assurance in these five areas, the more likely your lender will be to seriously consider your loan application,” he says.
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