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9 Things You Should Never Say to a Small Business Lender

When you’re applying for a small business loan, it pays to remember your mom’s advice to “Think before you speak.” No matter what type of loan you are looking for, you’ll improve your chances of getting your loan application approved by avoiding these 9 things you should never say to a small business lender.

1. “I haven’t filed my taxes yet.”

Typically, lenders will look at the past two years’ tax returns before approving a loan. If you haven’t filed your most recent tax returns, lenders won’t be able to verify last year’s revenue.

2. “I’m not sure how much money I need. How much can you lend me?”

Lenders want to see that you’ve thought through exactly how much money you need and what you are going to use it for. This should be supported with calculations such as the cost of the equipment you’ll purchase, the building you’ll buy or the material you’ll order with the money they provide.

3. “I only need $250,000, but as long as I’m here, why not throw in a little extra and make it $350,000?”

Asking for more financing than you need may seem like a smart idea, but lenders see it as evidence you are flying by the seat of your pants. Remember, lenders deal with lots of businesses like yours, so if your figures are out of whack with industry averages, they’ll think you don’t know what you’re doing.

4. “I don’t know my business credit score.”

Most people know how to monitor their personal credit score, but many entrepreneurs don’t know their business credit score—or even realize they have one. Start monitoring your business credit score as soon as you start your business. ExperianCreditera and D&B are among the sites that can help you check and monitor your business credit score.

5. “How much of my own money am I putting into this business? None—that’s why I’m coming to you.”

Any lender will want to see that you’ve put some of your own capital into starting your business. After all, if you don’t believe in the future of your business enough to make sacrifices for it, why should they? Do whatever you can to come up with at least 20 percent of the startup capital you need in order to launch.

6. “I don’t need a business plan; I’ve got it all in my head” or “I don’t need a business plan; I’ve been operating for five years without one.”

Whether you are financing a startup or a growing business, lenders will want to see some type of business plan to prove that you have thought through how you will grow your business and what you’ll do with their money. If your business is already up and running, grab your old business plan and update it, or create a new one. It’ll be easier since you have real numbers to work with and real success to show. If your business is a startup, a business plan is valuable for many more reasons than just getting financing—so don’t skip this step.

7. “If I can get just 1 percent of this $1 billion market my first year in business, my sales will be $10 million.”

Lenders see overly optimistic projections from startup entrepreneurs all the time. Getting 1 percent of a massive market is very difficult; in a market that big, you will have lots of competition. Writing a business plan will help you think through these projections, come up with more accurate ones and figure out how you’ll market your business to achieve the market share you want.

8. “I don’t bother with financial projections; they change too much.”

Lenders will want to see at least two years’ worth of financial projections to assess your business’s potential profitability and whether you have enough cash flow to pay back the loan. Creating financial projections can be challenging—especially for a startup—but it is essential to convincing a lender you’re funding-worthy. Besides, lenders are well aware that projections aren’t set in stone; they just want to see that your estimates are realistic.

9. “As you can see from my cash flow projections, I’m barely breaking even; I need your loan to help change that.”

Lenders are conservative and care most about getting their loan repaid. If you’re barely breaking even, they’ll worry that the loss of one client or customer could wipe out your ability to pay back their loan. You’ll need to prove you have a sufficient cash flow cushion to keep paying them back even if your business experiences hard times. Also make sure your cash flow projections include the amount of financing you’re requesting and the loan payments on it.


Rieva Lesonsky

Rieva Lesonsky

Contributor at Fundera
Rieva Lesonsky is a small business contributor for Fundera and CEO of GrowBiz Media, a media company. She has spent 30+ years covering, consulting and speaking to small businesses owners and entrepreneurs.
Rieva Lesonsky