Funding From Banks – What They Look For

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The first place you might check for funding opportunities is your bank, especially if you want to retain control over its growth. Angel investors and venture capitalists are wonderful sources for funding, but require that you compromise on some of the decision making. Going to the bank for a loan is sometimes the safest way to grow your business your way. Commercial banks traditionally fund businesses in the $25,000 to $100,000 range.

It's best if you already have an ongoing relationship with a banker when you go to ask for money to grow your business. Try to develop this relationship through opening your business checking account at a particular bank or taking out a small line of credit. This way when you seek greater financing, the banker knows a little about your credit history and about you as a person (this does play a role in the bank's decision to give you money).

Bring your business plan to the meeting you schedule with your banker. Funders want to know how much financing you need, exactly what you will use the money for, and how the bank will be re-paid. So be prepared to answer these questions. Be prepared for this initial meeting! Bankers want you to make a strong argument that you are a "good risk." Know that the bank representative probably will run a credit history on you, so be prepared to explain any questionable parts of your financial history.

Typically, banks (commercial lending institutions) tend to be on the conservative side. If you are just starting up, the bank wants to know that you have done market research and that you have sufficient collateral. If not, it is best to contact the Small Business Administration (SBA) and see how they can help (see our related article on this topic). If you are looking to expand your business, the bank is usually more willing to help out because of your proven record of success.

There are resources on the Internet to help you with your financing questions. Try one or more of the following to learn more about bank funding as well as other types:

  • www.entrepreneurmag.com (look in the money & finance section): an online business-to-business community marketplace built exclusively for small and emerging businesses, focusing on ways to finance your business, taxes, and your own personal finances.
  • www.bankrate.com: provides online consumers with financial data, research and editorial information on non-investment financial products.
  • www.businessfinance.com: provides the most up to date content available to assist in obtaining capital, gaining support, finding government programs, getting expert help, and much more.
  • www.vfinance.com: a financial opportunity exchange, offering access to a broad complement of financial services, proprietary business development tools, searchable databases and daily news in one location.
  • www.smallbusinesscenter.com: offers information on credit checks, loans, insurance and a variety of other services.


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