Next in the process of obtaining an SBA 7(a) loan is an initial consultation with the lender, usually done via phone call. This meeting is important, as it’s the first opportunity for in-depth interaction between the lender and borrower. It offers a platform for dialogue about the business in question and the various loan options available.
For the lender, this meeting is an opportunity to get their first real insight into the borrower and business. It marks the beginning of the assessment process, where the lender evaluates the feasibility of offering a loan and the loan terms they’re willing to offer.
For the borrower, the consultation is a chance to present the business and loan in the best possible light. Additionally, it’s an opportunity to get information on potential loan terms, such as interest rates and down payment requirements.
What the Lender Will Focus On
Exactly what the consultation includes can differ from loan to loan. However, here are the topics that the lender is sure to focus on:
• Planned Use of Loan Proceeds
First and foremost, the lender will want to know the planned use of the loan proceeds.
• The Borrower
One of the most important things to the lender is who the borrower is as a person. They want to know that the borrower is hard-working, stable, dependable, and overall capable of succeeding in business. Additionally, they want to know about the borrower’s business experience and qualifications in the particular industry of the business, as well as overall.
• The Business
Although the in-depth financial analysis of the business will come later, the lender will want to understand the business on a basic level, including how the business operates and its financial health.
Preparing for the Consultation
As the consultation will involve a lot of information about you, the business, and the loan, it’s crucial to thoroughly prepare for it. Here are some tips to help you be as ready as possible:
• Know the Business
Be prepared to talk about the business at length, as well as answer any questions about it. This means being ready to discuss its business model, market, competitors, financials, and more.
• Know Your Financing Needs
Be prepared to talk about your financing needs, including the purpose of the loan, the down payment you can provide, and how much funding is required (and why).
• Business Plan
Prepare a comprehensive business plan, including the business’s objectives, strategies for growth, and financial projections, and how the loan will be utilized to achieve these goals.
• Basic Financials
Have up-to-date business financials ready for the lender to look through. Ideally, this will include the previous three years of business tax returns, year-to-date financial statements, and the business’s current balance sheet. They won’t be analyzing them in-depth yet, but they’ll want to get a broad idea of the business and its financial health.
• Questions for the Lender
Prepare any important questions you have for the lender. These questions could include inquiries about specific loan terms, collateral requirements, the loan process to come, and more.
During the Consultation
Once you’re prepared, all that’s left is the meeting itself. Here are some tips to help you have a smooth and successful consultation:
• Build a Strong Case for Yourself and the Business
This is your chance to make your sales pitch to the lender. Highlight your strengths and those of the business as you explain in detail why the business will be successful in the future.
• Be Respectful and Constructive
First impressions matter! The loan process involves lots of close collaboration between the lender and borrower, and you want to come across as someone the lender would be happy to work with.
