Starting Your Business Banking Relationship

September 06, 2017

Do you want to start a business, but have no idea how to get started when it comes to securing the capital? Fortunately, banks like Renasant Bank exist to help turn big ideas into thriving businesses — because we know those small businesses grow and become the cornerstones of the communities we serve.

You may want to start with a banker from your neighborhood, or you may simply walk into a branch and talk to the first lender you see. Either way, almost every business banking relationship will start with these five must-haves: a business plan, a pro forma, a snapshot of your personal finances, proof of equity, and a listing of collateral.

Start with the business plan. This is a detailed document explaining the overview of your business, from your vision statement to your staffing to your daily operations. You should include a profile of your business, a description of the staff you’ll need, a projection of cash flow for the first year, a plan for marketing and expansion, and a contingency plan for what you’ll do when the economy gets tight or your projections don’t pan out.

Next, prepare a pro forma, which is a fancy way of referring to a hypothetical financial statement. It explains how your business will make money. This is a more detailed version of your cash flow projections, outlining your costs, profit margins, and, ultimately, your ability to make money (and pay back the loan).

To get a better understanding of you and your personal financial history, bankers will want to see your current personal financial statements and the most recent three years of tax returns. They’ll also pull your credit history to make sure it meets your lending institution’s credit requirements (check with compliance).

Equity is important to show your banker that you and/or the people around you are investing with are actually building the business you’re asking the bank to fund. In this context, “equity” refers to how much cash on hand you have (whether from your own investment into your business or in money you’ve received from outside investors) to use as working capital in your business’s operation. A lack of equity can be a red flag because it may signal to a banker that you don’t have any skin in the game.

Finally, your banker will want to see a listing of assets — property, equipment, inventory and bank accounts — called capital. These assets just prove you have “skin in the game” and means for some recovery should something unexpected happen (might need to reword).

With these fives items in hand, any of Renasant Bank’s business lending professionals will be able to discuss with you the road to starting your small business.