How often have you heard someone say “it takes money to make money?” Usually you hear that right before a new business owner is about to lay down some serious cash to purchase something big they don’t need at the moment. However there are times when a lawn care business owner needs to make a purchase to grow and needs a commercial loan from a bank to be able to do it. But before you walk into your local bank, you may want to get some things in order to improve your chances of getting that loan. But what kind of things should you do to prepare?
A member of the Gopher Lawn Care Business Forum shared with us an interesting insight. His wife works for a bank in the commercial loans division and I asked her what kinds of things should lawn care business owners be doing or not doing to improve their chances at success when applying for such a loan?
She said “here are some ways to improve your chances of getting that commercial loan.
1. Get your act together. Have a clear idea of what you are asking money for specifically. It is good to have a business plan, though one is not necessary in some cases. If you are thinking of getting a small loan for some new equipment, there is no need for a business plan there. What they will want to hear is 1.) I have solid expectations of making money and will somehow be able to repay the loan and 2.) I have researched what I need and am fully aware of all costs, etc.
2. Appear professional. When asking for a loan, although the ultimate decision to approve you may come from their home office elsewhere, if the loan officer at this branch thinks you are a risk, you will not get far. Come in clean, organized and present yourself well.
3. Be prepared. If you are asking for a loan, and you are self-employed, the bank is going to need some type of indication you can repay. That means having ID, Social Security Number, maybe even a couple of your most recent utility bills to prove where you live and the last two years income tax forms. Not only will this impress the loan officer but may speed the process along.
4. It doesn’t hurt to be a current customer. If asking money from a bank, consider doing business with them.
5. The obvious: the credit score. You have to pay your bills on time! If you have poor credit there is not a thing they can do other than show you to the door. Just remember though, all lending institutions have different lending rules, so if one doesn’t loan you the money, another may. However, keep in mind that each time a bank pulls your credit score, the score drops, so don’t apply for credit any more than necessary.
6. Get a copy of all of your credit reports from all three major credit bureaus (Experian, Equifax and Trans Union) before applying for the loan if possible. It doesn’t hurt to ask your lender which bureau they use before hand. Go over your scores with a fine-tooth comb. Go through the process to protest any inaccurate records (don’t waste time or money going to a credit repair place or haggling over things that are accurate but negative on your report). Don’t be alarmed if errors are on your report. On Experian’s web site, they freely admit that something like 75% of all credit scores contain errors. Check them frequently (every 6 mo. to once per year minimum). Errors pop up out of the blue, even though your credit has been inactive. If you challenge an error, be patient. It takes a few months to get them to drop off. If they refuse to fix an error, then ignore it and challenge it again and again until they remove it. Follow their process for submitting complaints about discrepancies to a T. Also send whatever proof you have of innocence. This is a tedius process, but eventually you will need your credit and there won’t be time to clean it up if you wait until then.
7. If there are errors, don’t sweat it. Get the appropriate paperwork to prove the credit report contains errors. If they aren’t fixed by the time you need a loan, then explain the situation the loan officer before hand, and offer copies of the proof to refute the credit information. If you have solid proof, the bank will accept it. Once we were going to get turned down for a loan on a house! When I asked why, they said there was a lien against me on my credit report. It turned out to be an error. The state fixed the problem in their files, sent me the proof which I gave to the bank and all was approved.
Another time when I pulled my credit report, there were probably 10-12 errors on them. Some were minor and did not affect my score. A couple did (negatively). It took us almost a year of back and forth before we got the errors fixed. No one hates the credit report companies more than I do, but what can you do?”
Those are some great points to keep in mind before you go out to apply at a local bank for a loan. If you have any further questions on this topic, make sure you post them on the Gopher Lawn Care Business Forum here.