Nevada State Bank: Don’t make these 7 major small business loan mistakes | nnbusinessview.com

Nevada State Bank: Don’t make these 7 major small business loan mistakes

Rick Thomas

Special to the NNBV

Remember — your business banker can be a great source of information about which loans you should pursue.
Photo: Shutterstock

EDITOR'S NOTE:

This article is included in the 2019 edition of Northern Nevada Smart Money, a specialty publication of the Northern Nevada Business View. Stay tuned to www.nnbusinessview.com this week and next week to read more articles published in the magazine, which will be inserted in the next print edition of the NNBV, coming out Monday, Aug. 26.

If you run a business or are looking to start one, chances are you will need a loan at some point. This is an important financial decision that can have a major impact on your company and its bottom line, so be sure to do some prior planning and try to avoid these common mistakes:

1. Not applying for the right kind of loan

One of the biggest mistakes you can make when applying for small business financing is applying for the wrong kind of loan. Be sure to explore all the options available to you. Will you qualify for an SBA loan? Will a line of credit help you smooth over the rough spots in your cash flow? Do you need a loan specifically designed for equipment purchases? Your business banker can be a great source of information about which type of loan will have the greatest impact on your success.

2. Not submitting complete and accurate financial information

Make sure you’re being completely truthful with your potential lender. All financial information should be accurate and complete. Remember, a bank can verify the information on your application. If the verification process shows different figures from what you submitted, your credibility will suffer, and your loan may be denied. Projections about your future should be realistic – don’t overstate your future income or understate your future expenses. You should be honest with yourself as well, because otherwise you may find that you’re in over your head.

3. Waiting to apply for a loan until you’re in an emergency

One of the most common mistakes small business owners make is waiting until they desperately need money to apply for a loan. Unfortunately, this is when it becomes harder to secure financing. Working with your bank and developing an established relationship and operating history will allow you to establish in advance the credit needed to support cash flow disruptions or make essential purchases.

Businesses must often choose between “needs’ and “wants.”
Photo: Shutterstock

4. Not having a real plan for the money you’re borrowing

Not having a plan may hinder your ability to get the loan you’re seeking, since lenders will ask you for a detailed blueprint on how you’ll use the money and how you’ll be able to pay it back. In addition, having a good grasp on how you will use the loan proceeds can prevent you from using them in less meaningful ways and endangering your ability to repay the loan.

5. Using the money for something that doesn’t lead to increased revenue

Like individuals, businesses must often choose between “needs’ and “wants.” Make sure you use the loan to help your business maintain stable operations and improve its bottom line. Getting a loan to grow your customer base or to become more competitive would lead to increased profits, making it easier for you to repay the loan. While it might be nice to redecorate the office or give yourself a raise, using loan proceeds for those “wants,” won’t improve your revenue.

6. Not having a clear understanding of the terms

Another way to do damage to your business is to take out a loan without understanding its terms. If you overlook some information, you may later find that you’re not getting quite the deal you were expecting. Ask questions if anything is unclear, and make sure you are 100 percent confident in what you are signing. Don’t be afraid to ask your banker for clarification.

7. Assuming that money is the answer to everything

Finally, make sure that a loan really is the answer to the problem you’re trying to solve. Money can help you fix a lot of issues, but problems like poor customer service, executive mismanagement, or personnel problems that are causing losses are not likely to be solved by a loan.

Rick Thomas
Courtesy Nevada State Bank

To contact Rick Thomas, a seasoned professional with 30 years of banking experience, for information on a business loan from Nevada State Bank, call 775-688-6959 or email Richard.Thomas@nbank.com.


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