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Borrowing for Your Business

Financing is a powerful tool for managing a business. It can help you make strategic acquisitions, reduce the cost of your current debt, and supplement your cash flow. But before you contact a potential lender, you need to carefully consider the key issues. And take steps to prepare for borrowing success.

Here’s a quick overview of some borrowing basics. We hope this information will help you get ready to find the financing you need. So you can achieve your goals. And move your business forward.

1. Get your team involved

You have some great people on your team. Get them involved in the planning process. Gather their input on your goals and the financial solutions you need to take that next big step in the development of your business. 

Their ideas and advice will help you save time on planning and preparation. Then you’ll ready to make a sound, strategic decision about borrowing for your business.

2. Keep a sharp focus on your business plan

Your business plan is a road map for your business. It’s designed to guide your decision-making as you pursue your business goals. So make sure that any effort to borrow for your business is clearly aligned with your business plan.

Of course, it’s also important to remember that the business world is constantly changing. So review and revise your business plan on a regular basis to make sure it’s completely up to date. 

And don’t forget. Whether you want to revise an existing plan or create a brand-new one, there’s plenty of help available.

  • The Service Corps of Retired Executives (SCORE) can help you develop a sound plan for your business.
  • Download a great business plan template.
3. Identify the right form of financing 

In the banking world today, there are many variations on the business financing theme. So you’ll need to explore your options. And find the specific kind of financing that makes the most sense for you and your business.

To help you get up to speed, here’s a quick introduction to the different types of loans and lines of credit that may be available to you:

  • Ready to purchase a building? Consider an affordable Business Mortgage.
  • Need to buy new equipment? Many businesses today use Term Loans.
  • Looking for a great way to purchase inventory, pay for shorter-term expenses, or set up a flexible source of funds to help you manage your cash flow? A Business Line of Credit is a great financial tool for that. Our article, “Five Reasons to Use a Business Line of Credit” explains ways to use a “BLOC” to support your business’s growth.
  • Using a Business Credit Card could be a smart approach for your business, especially for when making day to day purchases or for entertaining.
4. Determine exactly how much money you need

OK. You’ve made the decision to apply for a loan. But how much money do you really need? That’s a big question. 

After all, you need enough financing to achieve your goals. But you don’t want to borrow more than you need. Because then you’d be paying an unnecessary amount of interest on your loan.

So talk to your team. Review your business plan. Think carefully about your specific goals. Then calculate a realistic estimate of the amount you want to borrow. It’s a critical step in the smart borrowing process.

5. Understand how lenders think

To improve your chances of success, it helps to understand some of the key issues financial institutions consider before they provide credit to a business borrower.

Most lenders will also want to review the following documents before they make a decision on your loan or line of credit application:

  • Your business plan.
  • Three years of financial statements, including your income statement, balance sheet, and cash flow.
  • Cash flow projections.
  • Your personal financial statements.

The more you can anticipate the questions and concerns your prospective lender will have, the better your chances of borrowing success.

6. Start planning ASAP

Even if you don’t need financing right now, you may need it in the future. So it makes sense to develop a sound business plan. And learn about all of the issues involved in business borrowing. 

Then when you’re ready to buy much-needed equipment, make an important acquisition, or accomplish the other strategic goals on your agenda, you’ll know exactly what you need to do to enhance your chances for borrowing success.

And remember. If you ever need help at any point in the process, all you have to do is this:
Contact a Business Relationship Manager at ESL.

We’ll answer your questions, connect you with the right resources, and help you explore all of your options. So you can make a sound, well-informed decision about borrowing for your business.