If you’re itching to start a business—or grow a business you already have—you may want to pursue funding with a commercial loan or line of credit through a bank. Yet no matter how confident you are in your business plan, a bank must be very cautious about investing depositors’ money—after all, it’s the law. If you are confident that a commercial loan is the right choice for you and your business, here are some items you’ll need to convince a loan officer that your proposition is a great investment, and not a great risk.

Collateral. Your business must have hard assets to back up commercial loans. Banks look very carefully at these assets to reduce their risk. The more assets you have and the more you’ve invested in your business, the more likely your loan will be approved. Even if your business is structured as a limited liability entity (rather than a sole proprietorship or partnership), you may still need to pledge personal assets – most often home equity – to get the loan.

A good business plan. A business plan document is nearly always a necessity, no matter what type of loan you’re applying for. It can be short, but a bank still wants to see your basic business strategy and how you intend to pay back the loan, even if things go wrong.

Complete financial details. This includes all of your business’s financials, complete details on accounts receivable and payable, a current balance sheet, and personal financial records from every owner who has a significant share in the business. If you have any black marks on your credit report, get them resolved prior to applying for a loan.

Agreement on ratios. Most commercial loans require the business owner to agree to keep key ratios—such as debt ratio, current ratio, quick ratio—within a certain range, or the loan will be in default. To avoid a surprise, you should calculate these ratios and know you’re within acceptable ranges before approaching a lender. A good rule of thumb is to finance no more than half the value of your business.

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Give your business what it needs to succeed. To find out more about applying for business loans in College Station and many other communities in Texas and New Mexico, call City Bank at (800) 687-2265 or get in touch using the Contact Us form. At City Bank, our goal is to help you achieve yours.