The Frugal Gourmet
Our expert offers advice on applying for an equipment loan.
By George M. Dawson
Q: I manufacture gourmet dessert mixes. Soon I'll
need an equipment loan. How do I prepare? A: Congratulations on cooking ahead! Here's the
recipe, step by step: - Get your personal and business tax returns and payments
up-to-date. Order credit reports and clean up any errors. Make sure
your accounting system can consistently spread the last three years
of financial statements (balance sheet, income statement and
cash-flow analysis). Put together a 24-month cash-flow
projection.
- Make sure your trade suppliers' accounts are current.
Collect on stale accounts. Don't have any legal actions
pending. Save letters from satisfied customers.
- Contact equipment vendors and price what you need. Look into
financing or leasing options from the vendors. Don't
concentrate on bank financing alone.
- Visit with your bank on a preliminary but detailed basis. Does
it lend to companies like yours? Does it make equipment loans of
the size you need? What are standard terms? Review a loan
application to make sure you have all the data the bank will want.
If the bank is unresponsive or evasive, start looking for a new
bank at once.
- A lender will compare your financial performance and ratios to
aggregates of similar companies in your industry. Contact your
trade association for industry-specific data. Meet with a counselor
at your local Small Business Development Center to review the
Robert Morris Associates Annual Statement studies data. Be
prepared to clarify any differences between your company ratios and
the industry "averages" when you apply for the
money.
- Make sure the bank knows what a good investment you'll be.
Don't overdraw your checking accounts or be late with loan
payments. Mix with the bankers at business receptions, seminars or
workshops the bank offers. Try to refer new business to the banker.
Assume the banker knows nothing about your industry. Whip up an
information file on your industry, trends, competition and new
products. Whisk by to update the loan officer on good news at least
twice.
Bon application!
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George M. Dawson (gdawson@txdirect.net) is a
small-business consultant and author of Borrowing to Build Your
Business: Getting Your Banker to Say "Yes" (Upstart
Publishing, $16.95, 800-235-8866). Send him your financing
questions at bsumag@entrepreneur.com.
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