Banking

As mentioned in the first of this two-part series, most businesses deleveraged during what I call the Main Street economy’s Lost Decade — 2007-2016. That means they paid off debt and didn’t add any.

So those folks — possibly you — can be forgiven if they’re a little rusty at asking a bank for a business loan. But as the current economic expansion picks up, and you need growth capital to respond to the new opportunity, it’d be handy to brush up on some banking skills.

Last time, I revealed the first three of six loan request questions. Getting comfortable asking for or discovering the answers will improve your chances of getting a loan approval. In case you forgot, the first three are: Who decides? What do they need? How do they want it? Now for the other three.

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The two elements that define the term “deleveraging” are: stop borrowing and pay off what you owe as soon as possible.

During the period I call “The Lost Decade” — 2009-2016 — this practice was an essential survival fundamental for millions of small businesses. Indeed, across Main Street America, survey after survey since 2009 revealed small business owners reporting emphatically that they neither wanted nor needed a business loan.

Even during the past two years, as economic expansion has finally taken hold, polling has indicated most small businesses have funded growth with their own retained earnings which, by definition, is a product of deleveraging. But as the economy continues to grow, organic capital eventually runs out. And if you’re going to take advantage of sustained expansion opportunity, funding for most small businesses means, ultimately, a bank loan.

The good news is banks are standing by, ready to lend. Especially community banks, of which I’m an unapologetic, unabashed champion. The other news is that since it’s probably been a while since you’ve approached a bank for a loan, it’s probably time to brush up on some of the fundamentals of having a successful banking relationship.

Consequently, I’m going help you get back up to speed on six key questions you need to answer. We’ll cover three this week and the rest next week.

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