The question I hear most often from business owners is, “what should I do before applying for financing?”
My answer is always the same: The best time to seek capital is before you need it.
A financing conversation takes time. If cash flow is already tight and you need money right away, your options can become more limited, and you have less time to make a good decision. Starting the conversation early gives you an opportunity to figure out what you need, why you need it, and what type of financing makes the most sense for your business.
Before approaching a lender, be prepared to explain why you need capital. Typically, you are:
There are plenty of reasons to borrow money. What matters is understanding what the money is actually going to accomplish.
When I sit down with a business owner, I want to understand the plan behind the request. How will the capital help the business? What will it allow you to do that you can't do today? How does it fit into where you want the business to go?
The more specifically you can answer those questions, the easier it is to have a productive conversation about financing.
When asking for financing, be prepared to articulate the need and your understanding of the business. Do your due diligence and have a business plan that addresses key components of your business: market information, growth strategy, revenue model, financial projections.
Before seeking capital, make sure you understand:
The more research and work you do upfront, the better prepared you’ll be when questions come up.
For a new business, this is even more important. Start-up businesses may be eligible for financing through SBA loan programs.
You don’t have an operating history to point to, so your business plan and financial projections become the foundation for your request.
They should show that you understand the opportunity, have thought about the risks, and have a realistic plan for building the business.
Your financials tell the story of your business. You should know that story.
As bankers, we spend a lot of time reviewing financial statements because they tell us what’s happening inside a business. Your profit and loss statement, balance sheet, cash flow and debt schedule all provide important pieces of the picture.
But don’t just know the numbers. Know what’s behind them.
Before seeking financing, be prepared to explain:
You can make the financing process much easier by getting organized before you start.
One of the biggest challenges is receiving information piece by piece. It slows things down and makes it harder to see the full picture.
Ideally, have these documents ready:
Personal Guarantor Requirements
Owners must also submit:
This makes the process smoother for everyone. It also shows that you’ve taken the time to prepare for the conversation and are ready to take the next step.
The same applies to understanding the people behind the numbers. A good idea matters, but the team executing that idea matters just as much. Be ready to talk about who is involved, what experience they bring, and what each person will contribute.
Capital isn’t invested in an idea alone. It’s invested in the people responsible for turning that idea into a successful business.
Most entrepreneurs start a business because they believe in an idea. That passion is important, and it’s often what gives someone the confidence to take the risk in the first place. But passion has to be balanced with planning and a realistic understanding of the numbers.
At American Riviera Bank, we’re cash flow lenders. We look at whether a business can generate enough cash flow to meet its obligations and continue to operate successfully. That means we sometimes have to ask difficult questions:
These conversations aren’t meant to discourage a business owner. They’re meant to make sure the financing supports the business rather than creates additional strain. Taking on too much debt without a clear plan can create problems that become much harder to solve later.
And sometimes, the financing solution you have in mind isn’t the best fit. You may think you need a loan, but a line of credit or another option may make more sense.
Starting the conversation early gives you time to consider those options, ask questions, and make a thoughtful decision.
Getting the financing isn’t the finish line.
The businesses that perform well over time are the ones that continue to measure their performance against their plan and make adjustments when things change.
Sometimes you need to change direction. Sometimes you need to make a difficult decision before a small problem becomes a much bigger one.
Those decisions aren’t easy. But recognizing when something needs to change is part of running a business.
Don’t wait until you need financing to start the conversation.
Come in knowing what you need the capital to do. Have a plan. Know your numbers. And be prepared to talk openly about both the opportunities and the challenges.
That makes for a better financing conversation. It also gives your banker a better understanding of the business and where you want to take it.
At the end of the day, your financials tell your story. Make sure you know that story and can explain it. When you do, you’re giving your lender confidence not just in the business, but in you as the person leading it.
Bobby Boyes is First Vice President and Banking Relationship Manager at American Riviera Bank. and has worked in banking since 2004 and is responsible for developing new deposit and loan relationships for various business sectors. Bobby’s deep banking knowledge and commitment to providing a superior level of customer relations and service ensures his client’s goals are top-of-mind throughout the discovery and onboarding process of transitioning banking relationships to American Riviera Bank.
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