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The Key Points
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What type of industry
are you involved with?
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Is it new, emerging or
growing?
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Is it dependent upon
other industries?
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Factors that impact the
business risk, such as management experience, depth and integrity.
How long has the business been in existence? Also, include market
share, size, product line (supply,
sales, and distribution), and
profile of customers.
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What is the
legal form of the business? Is it a partnership, proprietorship,
corporation (what type),
joint venture, etc.?
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Quality of
management.
What type of experience does the
management team have with this
specific industry, and what is the commitment? Are the owners
involved directly with the business or are they absentee owners?
What assets or liabilities are involved with the business? How does
management take out their salaries/bonuses?
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What facilities are used
and where are they located? What are the terms of the lease? How
does it compare to competitors' facilities? What are the capital
expenditures, insurance coverage, etc.?
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Existing financing. Do
you presently owe trade suppliers, other banks, principal
shareholders, relatives, and others?
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Who are your sources of
suppliers, including history and discounts?
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What are your existing
loan arrangements, bank relationships, borrowing/repayment history,
estate planning?
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Provide a financial
analysis, which includes accounts receivable/payable, credit policy,
collections/bad debt experiences, and conditions of inventory. Are
your taxes current? How is the company capitalized compared with the
industry? What are your
marketing plans, sales projections?
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Also include
balance sheets, income statements, expenses vs. sales,
operating
profit margin, asset management, liability management,
cash flow summaries, and projections and sensitivity analysis.
The Two Most Important Questions
In
your ability to answer the above questions, you help the bank answer the
most important questions:
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What is the purpose of
the loan?
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What are the sources of
repayment and quality of those sources so that the bank can devise a
program of repayment that makes sense to the
small business owner?
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