Commercial & Industrial Loans

How can managerial strengths earn you a loan?

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When banks analyze loan applications, they look at three categories of risk: business risk, or the risk your company will attract customers; financial risk, the risk you’ll be profitable enough to repay the loan; and managerial risk. Of these three, managerial risk – or the odds management can shepherd the company to success – is the one most overlooked by some businesses. Here are 5 key business management capabilities banks examine when evaluating loan applications.

  1. A defendable marketplace niche. Banks want to know applicants have a strong, reliable, arguable niche that will make them competitive in good economic times and bad.
  2. The ability to service the debt. Banks seek to learn whether the collateral and expected cash flow will be sufficient to meet the company's debt obligations. That calls for applicants to have financial management skills like budgeting, projecting cash flow and producing profit-loss statements.
  3. Experience in similar leadership roles. Unless there is demonstrated success in managing the business that is applying for the loan, Banks seek to determine if the applicants have experience owning a successful similar business in a different industry, or that they have managerial experience in such a company.
  4. Ability to tap others’ experience. Banks would like to know if applicants can draw on guidance from other individuals who have enjoyed success in the field.
  5. Understanding of the market. Banks want loan applicants to show they know the market in which they’ll be competing, including the strength and viability of competitors and the unique selling proposition their product or service offers.

Business loan applicants’ ability to demonstrate that they possess these essential business managerial capabilities can go a long way toward ensuring that when they need to borrow capital, the business loan they seek will be theirs.     

Please let us know if this blog post is helpful. We look forward to your insight.