Obtaining Bank Loans
Securing bank loans is an important part of running a business. If you have just started your business, you may be aware that most small businesses fail within a year. Whether your new business succeeds or not depends on many factors, such as borrowing the right amount of money to keep the company going. How much you should borrow depends partly on the form your business takes: sole proprietorship, LLC, or corporation. Knowledgeable Pleasanton business lawyer James G. Schwartz can help you draft formation documents, determine how much money you need as you start your business, and advise you on obtaining reasonable bank loans.What Do Banks Look For in a Corporate Borrower?
Banks and other financial institutions that lend money want to see that the loan is likely to be repaid when determining whether to give a loan. If you are a sole proprietor or just starting your company, you should clean up your credit report before applying for a loan. When businesses are already organized as an LLC or corporation, a banker will probably review the Operating Agreement or bylaws, assess whether you have a sufficient cash flow, whether you have a track record of profitability in the same type of business, and whether there are sufficient assets and collateral to handle the problems that inevitably arise while running a business.
If you've organized your company as a corporation or an LLC, a bank may still ask you to personally guarantee the loan or use your personal assets as collateral. Banks are more comfortable loaning money to someone with personal money on the line. However, if you personally co-sign your business loan or personally guarantee the loan, you may be adversely impacting your limited liability status. Your own property can be seized for failure to repay the loan. This is one of many reasons it is critical to consult an attorney about better strategies to deal with this issue.
You will need to submit a business plan to obtain the bank loan. A sound business plan includes: the amount of money you are requesting, the specific character of your business, your experience as well as the experience of other member or partners, and the personal credit and financial histories of you and any partners. There are formats for these plans, and working with an attorney can help you make sure you have covered every required detail in a professional manner.
If you have not owned a profitable business in the same field as your new business, you generally should have either worked for or managed the same type of business. Banks will want to know that you understand the field so that you can make the best use of the money and have sufficient funds afterward to repay the loan.
On the other hand, if you have previously successfully managed a particular kind of business but want to start a different kind of business, you may need to hire people who have experience in the same arena as the new business. For example, if you have experience managing a profitable restaurant in Las Vegas but want to open a construction company in Northern California, you should hire one or two veterans of the construction industry in California in key roles.
Finally, you should apply for the right type of loan. If you need money in order to deal with a seasonal fluctuation, for example, you would want a line of credit rather than a one-time loan.Secure Business Financing With the Help of an Experienced Business Lawyer
With over 30 years of experience handling business law matters for many different companies in Oakland, Newark, and other East Bay Cities, Mr. Schwartz can help you ensure that your business plan is realistic. He can also review other aspects of your background and application to make it more likely that you qualify for a bank loan. Contact experienced Pleasanton LLC attorney James G. Schwartz at 925-463-1073 or via our online contact form.