When you step into a lender’s office seeking a small business loan, it’s common to experience some anxiety. After all, you might know what to bring – a business plan, tax statements – but what exactly is the lender looking for? While they want to see your documents and learn about your business, your lender is ultimately assessing your paperwork on a more holistic level and with a single term in mind: viability. They want to know that your business is in it for the long haul, but business viability is far from a precise term.
What Is Business Viability?
At its core, a viable business is one that can turn a profit year after year, but in reality, the concept is much more complicated because it hinges upon the unknown. As a business owner, you can have the most detailed business plan in the world, but the fact is that there are always things we can’t know – about our customers and our product, about the future of the economy, and about our personal lives. This is why solvency and cash flow often act as stand-ins for viability in the lending process.
Tell Your Story
When assessing a business for viability, then, lenders want to see how you plan for those unknowns and how you cope with uncertainty more broadly. Business owners need to be flexible and inventive, but they also need to be detail oriented, able to develop a plan and stick to it if they’re going to create a viable business. In other words, even though you’re going to fill out a lot of paperwork and go over endless profit and loss scenarios, viability often hinges on your business’s narrative, so be sure you have a good story to go with your statistics.
Know Your Lender
In addition to having a clear business narrative, it’s important that you understand how your lender approaches the assessment process. For example, Seek Capital encourages entrepreneurs to explore a range of funding options, including startup business loans, to increase the likelihood of borrowing success. Since different types of lending rely on different lending criteria, this means – with proper support and guidance – startup founders are more likely to qualify for a loan. And for those applicants pursuing traditional loans who fail to qualify, Seek Business Capital helps borrowers understand what changes they need to make to secure funding.
Of course, most lenders aren’t so forthright, especially with applicants who don’t initially qualify for a loan, and that’s why it’s important to do your homework. Even if the lender won’t work with you to outline weaknesses in your particular case and strengthen your application, take time to read their website, consult with more experienced investors and entrepreneurs, and keep revising your business plan.
The only real test of business viability is long-term performance, but obviously, lenders can’t grant funding based on the unforeseeable future – the aforementioned unknowns. As such, a strong application is one that demonstrates that no matter what the future throws your way, your business can withstand it. If you’re adaptable, have a great team of employees, and a stable funding stream, then, the unknown isn’t much of a threat. It’s just an exciting challenge and a chance for you to prove your business acumen by thriving even when the odds are against you.